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Creating Bank Write-downs |
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Creating bank write downs is the most exciting opportunity of our time. Out of nowhere, the opportunity to petition the banks to unilaterally write down loans (primarily land loans) is the surprise win of the economic downturn. Even low LTV loans from strong sponsor/borrowers should be petitioned. To use a southern expression, "turning a sow’s ear into a silk purse" is the new mantra. Moreover, many lenders just want out, or they are being liquidated, hence, must get loans off their books. Timing could be ideal to payoff because 1) Banks are afraid, 2) Many are mandated to liquidate flagged asset classes, or even, must liquidate their entire portfolio, 3) Government stimulus programs have yet to take form, and 4) A market floor has not been established.
| Consider a residential property conservatively valued today at $25 million. 1) Existing debt with the bank is $18 million. 2) Bank will write down/accept payoff to $10 million to get off their books. 3) LFG offers $8M NON-RECOURSE finance, albeit at higher rates as an interim or bridge note. 4) Borrower/Sponsor injects $2 million to further buy down note and begrudgingly accepts LFG offer of $8 million. 5) Borrower/Sponsor accepts high rate private finance because A) tremendous write-down, B) non-recourse, C) quick to settle, and D) saves cash from drawing down on existing credit facility, even though rates comparable. |
Your situation may be different, but we would like to speak with you. Please call Kyle I Poole at 202.244.3000 to discuss ideas. Private finance is ideally suited for funding bank discounts or write-downs, due to speed and flexible structuring. Many of our notes are Non-recourse in nature.
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