Non-Recourse Carve Outs, Bad-Boy Guaranties, and Personal Liability: Latest Developments
Avoiding or Resolving Lender and Guarantor Disputes in and Outside of Bankruptcy
Recording of a 90-minute premium CLE webinar with Q&A
This CLE course will offer real estate and finance counsel an examination of some of the more troublesome provisions at the heart of disputes between borrowers and lenders. The panel will review commonly used carve outs contained in non-recourse provisions, analyze operative provisions in bad boy guaranties, and discuss recent court cases, including Cherryland and its progeny. The panel will outline strategies for avoiding and resolving disputes involving these provisions.
Outline
- “Springing recourse” and bad boy guaranties: Wells Fargo Bank N.A. v. Cherryland Mall Ltd. Partnership
- Basic facts and procedural history
- Analysis
- Single-purpose entity/separateness: requirements and violations
- Definition of “single-purpose entity”
- Substantive consolidation in bankruptcy
- Cases relied upon - Borman
- Michigan and Ohio legislation
- Non-recourse carve outs
- Carve outs from A to Z
- Environmental indemnities
- Recent case law concerning non-recourse loans
- Other protective devices
- Tax implications and non-recourse debt
- Conclusion
- Sample provisions
- Case study
- Bankruptcy perspective
- Best case: Conclude a successful plan of reorganization whereby the remaining first mortgage debt is amortized over an extended period, but at a lower market interest rate
- Worst case: Provide for an orderly liquidation in bankruptcy, thus avoiding a distress sale at foreclosure
- Immediate benefits
- Impediments to reorganization
- Possible actions
- Future benefits
- Bring the mortgagee to the table
- Conclusion: What have we learned?
Benefits
The panel will review these and other key questions:
- What are the types of non-recourse carve outs and how should counsel approach them?
- What are the legal and practical ramifications for the guarantor of a defaulted loan under a carve-out guaranty?
- What are the key strategies for resolving disputes involving these provisions?
- How have these provisions been treated in bankruptcy and what are some strategies for resolving disputes in bankruptcy?
Faculty
Thomas W. Coffey
Senior Counsel
Tucker Ellis
Mr. Coffey focuses his practice on bankruptcy reorganizations and insolvency matters and represents debtors, creditors,... | Read More
Mr. Coffey focuses his practice on bankruptcy reorganizations and insolvency matters and represents debtors, creditors, committees, and trustees in Chapter 11 and Chapter 7 bankruptcy cases. He is a former bankruptcy trustee and was a member of the adjunct faculty at the University of Cincinnati College of Law.
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James H. Schwarz
Partner
Benesch Friedlander Coplan & Arnoff
Mr. Schwarz is a member of the firm's Real Estate & Environmental Practice Group. He has acted as... | Read More
Mr. Schwarz is a member of the firm's Real Estate & Environmental Practice Group. He has acted as developer's counsel in connection with the development and financing of the largest shopping mall in the United States, the Mall of America. He has represented real estate developers in the acquisition, development, financing, leasing and sale of real estate.
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Daniel K. Wright, II
Partner
Brouse McDowell
Mr. Wright is a nationally recognized transactional lawyer who has represented major clients across the country. He is... | Read More
Mr. Wright is a nationally recognized transactional lawyer who has represented major clients across the country. He is highly regarded for his ability to structure complex commercial transactions with multiple parties. Having worked through numerous business cycles over the past 30 years, Mr. Wright offers his clients the insight and practical business judgment gained in handling sophisticated transactions over many years.
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