Subordination

News & Analysis as of

Real Estate Lien Priority Case - Effect of Subordination Agreement on Junior Liens

In a recent decision, the Utah Supreme Court addressed a matter of first impression in Utah, namely, whether a subordination agreement between two senior lenders, which reversed the priority of their respective liens against...more

Bank and Finance: The Equity Cure Provision—Saving Debt with Equity

For many sponsor backed borrowers, and this would include technology companies which have raised at least one round of financing, the equity cure provides a lifeline which isn’t necessarily available to traditional borrowers....more

Blog: Mandatory Subordination: How Even A Money Judgment Can Be Treated Like Equity In Bankruptcy

When an insolvent entity files for bankruptcy, it can be tough to be a creditor. But holding equity — stock in a corporation or a membership interest in an LLC, a limited liability company — can be even worse. ...more

Financial Services Weekly News Roundup - April 2015 #2

The SEC Acts to Protect Whistleblowers Against Restrictive Confidentiality Provisions. In a development that should send HR directors and general counsels to review their form confidentiality agreements, the SEC announced...more

USDC For Delaware Affirms Bankruptcy Court’s Denial Of Derivative Standing

On March 13, 2015, the United States District Court for the District of Delaware, in the case of Walnut Creek Mining Company v. Cascade Investment, LLC, Civ. No. 14-738-LPS (In re Optim Energy, LLC, Bankr. Case No....more

OCC Releases Bulletin Summarizing Interim Final Rule on Subordinated Debt Issued by National Banks

On February 6, the Office of the Comptroller of the Currency (OCC) issued OCC Bulletin 2015-11, which describes further clarifications to an interim final rule on subordinated debt that was issued on February 28, 2014. The...more

Corporate and Financial Weekly Digest - Volume X, Issue 6

In this issue: - SEC Publishes Rules for Reporting Security-Based Swaps - SEC Proposes Rules for Disclosure of Companies’ Hedging Policies - CFTC Extends Relief From Certain OCR Requirements - NFA...more

Commercial Restructuring & Bankruptcy Alert - February 2015

In This Issue: - Minority Holders Gain Leverage Through Recent Interpretation of Trust Indenture Act - New Jersey Joins Number of States Creating Specialty Business Courts - Credit Bid Rights Bolstered in...more

General Contractors Beware of Subordination Clauses

In California, a general contractor can usually rest assured that in the event of nonpayment, it can rely upon the remedy of a mechanics lien, which remedy is, in fact, even a constitutional right....more

A Cautionary Tale for General Contractors

Construction lenders often go to great lengths to ensure their deeds of trust have priority over mechanic’s liens. Typically, as part of the construction loan process, general contractors are asked to sign documents...more

Mechanics Lien Subordination: Illinois Further Limits Construction Lenders’ Ability To Ensure Priority Against Mechanics Liens

On July 16, 2014, Illinois enacted Public Act 98-764 (Senate Bill 3023) (“SB 3023”), which amends the Illinois Mechanics Lien Act (770 ILCS 60/ et seq.) (the “Act”) to prohibit subordination of mechanics liens on Illinois...more

Illinois Adds Omitted Subordinate Interest Provisions to Mortgage Foreclosure Law

On August 26, Illinois amended its Code of Civil Procedure by adding Section 15-1603.5 to address situations where a foreclosure sale occurred, but a junior lienholder was not named in the foreclosure complaint. Specifically,...more

Bankruptcy Court Shields Equity Sponsors Serving as Secured Lenders from Individual Creditor Seeking to Litigate Subordination and...

In a recent case — In re Optim Energy, LLC — the Delaware Bankruptcy Court denied an individual creditor’s request to pursue the subordination or recharacterization of the claims of secured lenders who were also the debtors’...more

Lenders Can Prepare for Tenant Offset Rights in SNDAs

Tenants’ limited recourse to their landlords has made “offset rights” a major issue in negotiating Subordination, Non-Disturbance and Attornment Agreements (SNDAs). Tenant offset rights arise when the tenant has the...more

It's Always Something: The Repeated Assaults on Licensee Rights in Bankruptcy

No one has ever asserted that the bankruptcy arena is for the faint hearted. on the road to development of a plan of reorganization (or more commonly these days, a sale of all of the debtor’s assets), there can be bruising...more

A Guide to Contract Interpretation - October 2013

In This Guide: - Introduction - Contract-Interpretation Flow Chart - Contract-Interpretation Principles And Case-Law Supplement - Excerpt From: Introduction: Transactional attorneys and...more

Lenders Beware! Seller Subordination Agreement Ahead Lenders Beware! Seller Subordination Agreement Ahead

In Citizens Business Bank v. Gevorgian (2013) 218 Cal.App.4th 602, the Court declined to enforce a subordination agreement, where modifications to the underlying loan accomplished through a “side letter” to the construction...more

Secret Lender-Buyer Side Deal Renders Seller Subordination Agreement Unenforceable

A California Appellate Court ruled recently that a seller’s subordination agreement was unenforceable where the buyer and the lender entered into a side agreement between themselves that the seller knew nothing about and that...more

Involuntary Bankruptcy Petitions Dismissed Where Alter Ego Status Was Disputed

The United States Bankruptcy Court for the Southern District of New York granted motions to dismiss involuntary Chapter 7 petitions filed against TPG Troy LLC and T3 Troy LLC (the Troy Entities). Petitioners filed numerous...more

Preparing for the Worst: Texas SNDAs get lenders, landlords and tenants on the same page in the event of foreclosure

Subordination, Non-Disturbance and Attornment agreements (SNDAs) allow lenders, landlords and tenants to collectively plan for the worst case scenario — foreclosure. In the event of foreclosure and in the absence of an SNDA,...more

Beware of Deed of Trust Securing Multiple Loans: Priorities May Not Be as They Appear!

In R.E. Loans LLC v. Investors Warranty of America, Inc. (2013) 212 Cal.App.4th 1432, the court of appeal decided that a subordination agreement was enforceable even though the new deed of trust (“subordinating loan”) to...more

Beware of Intervening Liens in Subordination Agreements

Most lenders that service second mortgages or equity lines have received requests to subordinate their loan to a subsequent refinance loan. Many times these requests come years after the refinance loan was closed. Most...more

A Guide to Contract Interpretation - February 2013

Introduction - Transactional attorneys and litigators often take a very different approach toward contracts. Transactional attorneys focus on the ex ante — the relationship between the parties before there is a dispute....more

November 2012: Bankruptcy Litigation Update

In This Issue: -Jefferson County Section 928 Decision: In a matter of first impression and potential importance in the municipal bond market, the Bankruptcy Court for the Northern District of Alabama held in Bank of...more

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