Commercial loan workouts & forbearance

Additional time is useful when it supports a credible path to repayment, refinancing, an orderly sale or another workable resolution. It can also allow collateral to deteriorate, proceeds to disappear or competing creditors to gain an advantage.

We help lenders assess what an accommodation is expected to accomplish, what the borrower and guarantors must provide in return, and what should happen if the plan fails. That assessment includes the financial information supporting the proposal and the lender’s practical alternatives to an agreement.

• Reviewing loan documents, guaranties, mortgages and security agreements.
• Identifying defaults, notice requirements and available contractual remedies.
• Evaluating borrower reporting, collateral values and the movement of proceeds.
• Negotiating forbearance periods, payment requirements and performance milestones.
• Addressing additional collateral, guarantor obligations and reporting requirements.
• Documenting acknowledgments, reservations of rights and appropriate releases.
• Coordinating consent requirements and competing interests among lenders.
• Evaluating enforcement, receivership or bankruptcy alternatives if negotiations fail.

A forbearance agreement should clearly identify the accommodation being made, its duration and conditions, and the circumstances that end it. The documents should also address how existing defaults, collateral rights and guarantor obligations are being treated.

Minnesota’s credit-agreement statute, Minn. Stat. § 513.33, establishes writing and signature requirements for a debtor to maintain an action on a credit agreement. Its definition includes agreements to forbear repayment and other financial accommodations. Clear documentation of the terms matters both when an agreement is signed and if the parties later disagree about what was promised.

Our commercial loan documentation practice connects the drafting of workout agreements with experience enforcing loan obligations and responding to borrower claims.

A distressed credit becomes more complicated when several lenders claim interests in the borrower’s assets or disagree about the next step. A proposed workout must account for those competing positions and the consequences of acting without agreement.

In the RP Financial matter, Matthew represented Star Bank in litigation involving an equipment-finance business, a guarantor and seventeen lenders. He led negotiations that brought the parties into an agreed voluntary receivership instead of a Chapter 11 proceeding. The matter illustrates how a workout may require court proceedings and coordination among lenders with competing interests.

Star Bank v. RP Financial, LLC, et al., Hennepin County District Court, Case No. 27-CV-25-16576. View the case docket.

Workout negotiations should be evaluated alongside the lender’s alternatives. Those may include enforcing guaranties, pursuing collateral, seeking a receivership or addressing the credit in bankruptcy.

Where a borrower or insider has diverted assets or proceeds, the strategy may also require fraud litigation and asset recovery. If bankruptcy becomes part of the matter, our bankruptcy litigation practice addresses contested creditor rights and related proceedings.

The objective is to make decisions with a clear understanding of the available remedies, the assets supporting recovery and the risks of further delay.

Farm and agribusiness credits add seasonal cash flow, crops, livestock, equipment and farm-product proceeds to the analysis. Farmer-lender mediation requirements and competing agricultural claims may also affect the available options and their timing.

Our agricultural finance practice addresses those issues alongside documentation, workout negotiations and recovery planning.

For a troubled commercial credit, contact Matthew Bialick to discuss the circumstances and arrange a conflict check. Useful background generally includes the loan and security documents, guaranties, payment history, recent borrower reporting and a short timeline.

Contact Matthew
952-239-3095
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