Posted on ABA Banking Journal’s Unconventional Wisdom blog Friday, July 22, 2011.
Multi-lender loan packages may not treat all lenders fairly in default situation
Could securing all of a borrower’s obligations actually increase the credit risk to its lenders?
Although this question may seem counter-intuitive, we maintain that expanding the scope of obligations secured under a credit agreement can potentially misprice the true credit risk to lenders and render it more difficult for them to recover their principal in a default scenario.
The objective of this article is to help lenders and counsel evaluate and address such risks when documenting financial transactions.
To read the full article, please visit http://www.ababj.com/blog/2284.html.