USFN Briefing: Commercial Chapter 11s: Protecting Business Purpose Loans Through Reorganization

I. Introduction 

• Defining business purpose loans  

• Why business purpose loans present unique issues in Bankruptcy  

II. Cash Collateral and Adequate Protection 

• Early case assessment and risk identification  

• What constitutes cash collateral  

• Debtor use of rents, accounts, and other proceeds  

• Negotiating cash collateral orders  

• Adequate protection payments and replacement liens  

• Monitoring compliance throughout the case  

III. Cross-Collateralized Loans and Multi-Property Portfolios 

• Cross-collateralization structures and enforcement challenges  

• Valuation issues involving multiple properties  

• Allocation of collateral value  

• Impact on plan treatment and lender recovery  

IV. Chapter 11 Plan Issues Affecting Commercial Lenders 

• Loan modification through confirmation  

• Possible extension of loan maturity dates  

• Interest rate modifications  

• Cramdown considerations  

• Treatment of balloon payments and amortization  

V. Third-Party Guarantors 

• Rights against guarantors during bankruptcy  

• Requests for release or injunction of guarantor liability  

• Non-consensual third-party releases after Purdue Pharma  

• Negotiation strategies to preserve guarantor liability  

VI. Subchapter V: Key Differences for Commercial Lenders 

• Eligibility requirements  

• Trustee's role  

• Elimination of the absolute priority rule  

• No disclosure statement requirement  

• Confirmation standards  

• Implications for secured business purpose lenders  

VII. Chapter 12 Overview 

• Eligibility requirements  

• Unique plan provisions  

• Secured claim modification  

• Issues commercial lenders should anticipate