ALI-ABA Course of Study Commercial Real Estate Defaults ...

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For each party indicate to extent known the names of principals and other responsible
persons and of contact persons with positions held; the type of entity (general partnership,
limited partnership, corporation, land trust, individual ownership, co-tenants). For each
entity and person, indicate proper name, and if known address and telephone number, fax
number and name and details for each attorney representing such person or entity.
Reconfirm lack of conflicts after identifying all of the parties in interest.
1.1 Owner of Property
Consider structure. For instance, if the borrower is a partnership, who are the
general and limited partners Are there any layered or multi-tier entities
involved Is there any pending litigation involving the debtor 21
1.2 Secured Creditors
Is there a possibility of a marshalling claim by junior lenders
1.3 Unsecured Creditors
Seek to determine amount owed. In any workout arrangement seek to require
general creditors to be kept current since the existence of a substantial general
creditor class may adversely impact on ability of a secured creditor to lift
automatic stay and may increase possibility of a successful cram down.
1.4 Recorded and Potential Mechanics' Lien Claims
Review local law and title policy to determine whether there is any real possibility
of mechanics' liens that might prime our client's mortgage. If so review divestment
statute if there is one or local case law.
1.5 Other Lenders and Participants
Are there other lenders to the same borrower or to other entities with common
guarantors Consider possibility of a joint workout strategy and possible conflict
problems. Is there need for a joint defense and common defense agreement in
regard to client-attorney and work product privileges Consider impact of any
modification of loan documents upon priority position of subordinate lien
holders. 22
21 The existence of a significant number of pending law suits against the borrower is usually a significant adverse
factor to effectuate a workout since a significant creditor can usually frustrate a workout and will often be able to
secure benefits not warranted by the relative or record priorities of the parties.
22 In some jurisdictions a modification of the obligation (or in some cases, the security) may be treated as a "novation"
and thus result in the priority of the mortgage lien being reestablished as of the date the restructuring becomes effective.
See title insurance discussion at 1.6.
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DSC:767996.2
4/4/2006 3:55 PM Copyright 1996 - 2002 Marvin Garfinkel
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