"Don't assume the guarantee says what you think it says," warned moderator Joshua Stein, a partner at Latham & Watkins LLP. In particular, Stein told the audience of lenders, "there are all kinds of surprises and weird interactions in partial guarantees."
Nor should a borrower's claim of distress be taken at face value, Stein said, advising the audience to examine the borrower's entire balance sheet rather than focusing solely on the distressed loan. "The stronger the guarantor, the weaker his position is" in negotiating, he said.
Common workout structures include the lender securing deeds in escrow, the borrower finding a buyer for the property and the lender offering forbearances or extensions on the loan. Stein offered advice on each, noting that a deed in escrow can be an appealing mechanism if the lender can obtain it as part of a prepackaged bankruptcy proceeding.
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