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Drafting Guaranties and Nonrecourse Carveouts in Commercial Finance Transactions

Enforceability Issues for Lenders and Guarantors In and Out of Bankruptcy

Recording of a 90-minute premium CLE video webinar with Q&A

This program is included with the Strafford CLE Pass. Click for more information.
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Conducted on Thursday, January 20, 2022

Recorded event now available

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This CLE course will provide finance counsel with an analysis of the enforceability of loan guaranties, including bad boy carveouts, in loan default and bankruptcy scenarios. The panel will also discuss potential liabilities for the lender and common defenses asserted by borrowers and guarantors.

Description

The loan guaranty agreement is often heavily negotiated but quickly forgotten after closing a commercial loan transaction--until the loan is in trouble. Enforcement of loan guaranties can involve various issues, particularly in the context of a loan default or the borrower's bankruptcy.

Commonly litigated issues for personal guaranties include the validity of the agreement, waiver of defenses, the continuing nature of the guaranty, and whether it is revocable or a sham guaranty. Bad boy guaranties, which seek to attach recourse liability on guarantors for engaging in specified prohibited acts, have given rise to a separate body of litigation.

Bad boy guaranties triggered as a consequence of a bankruptcy filing have generally been upheld and borrower’s counsel should make sure that recourse carve-outs are drafted clearly and concisely in order to limit borrower’s recourse liability.

Listen as our authoritative panel of commercial finance attorneys discusses the enforceability of loan guaranties, potential liabilities and defenses, and best practices for both parties in drafting guaranty instruments and nonrecourse carveout provisions.

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Outline

  1. Contested loan guaranties and recent court decisions
  2. Enforcement and liability issues from the lender's perspective
  3. Defenses and liability issues from the guarantor's perspective
  4. Impact in the context of bankruptcy
  5. Drafting loan guaranties and carveout provisions

Benefits

The panel will review these and other key issues:

  • In what situations will lack of consideration be a viable defense to enforceability?
  • What lender liability risks are inherent in dealings with a guarantor?
  • What legal and business strategies can lenders employ to maximize their recovery?
  • What has been the impact of bad boy guaranties in a distressed debtor's restructuring option?

Faculty

Diamond, Meryl
Meryl P. Diamond
Partner
Alston & Bird

Ms. Diamond focuses her practice on commercial real estate finance. She represents national commercial banks,...  |  Read More

Sparkes, Robert
Robert W. Sparkes, III
Partner
K&L Gates

Mr. Sparkes has extensive experience in complex civil and commercial litigation and regularly represents banking,...  |  Read More

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