Think Real Estate, Summer 2015


Welcome to this issue of Think Real Estate, a resource for timely legal analysis of issues affecting the real estate industry and your business' bottom line. Our real estate lawyers represent clients in areas critical to the real estate industry and are engaged in every facet of buying, selling, developing, operating, leasing, capitalizing and financing real estate for operators, investors and users for both U.S. and foreign companies. For more information about our people and capabilities, visit our Real Estate Practice Group page.

Mortgagees Beware: District Court Affirms Momentive Below Market Cramdown Interest Ruling

Sophisticated real estate lenders spend significant amounts of time and energy attempting to insulate themselves from potential bankruptcy filings by their borrowers. A primary reason, which many an experienced real estate lender has found out the hard way, is the risk that a debtor in bankruptcy may "cram down" a plan of reorganization over its lender's objection. Under a typical cramdown plan, a debtor may stretch out payments to its secured creditor for several years and attempt to replace its negotiated interest rate with a new, below-market rate of interest. An ongoing debate in the Chapter 11 context is whether cramdown interest must be provided at market rates (e.g., a rate the debtor could obtain on a new loan in the open market), the rate negotiated for in the secured creditor's loan documents, or a below-market interest rate determined by a risk-adjusted formula.

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