Only applies if your asset is at least worth the debt.
Not legal advice - just an fyi of what I’ve seen.
Step 1: make a capital call with a purchase offer alternative at the debt balance
Step 2: nobody funds
Step 3: sell at debt balance
Step 4: avoid foreclosure
Step 5: borrower again when market is better and tell everyone you’ve never had a foreclosure
I’ve seen this several times already.
They do not have any money in these deals so why have the headache of a BK or foreclosure. Don’t think they have many personal relationships with those 300 LPs.
In this scenario the syndicator would have to raise new equity (and debt) at that lower valuation? This would likely mean finding a guarantor to flash a balance sheet and contribute new GP capital (their old GP capital is wiped out). Still better than showing BK on the scoreboard i guess
They sold to a third party at the debt balance.
Oh, yea so they're just selling and wiping out all the equity. I thought you meant they would sell the deal to themselves through a new entity at a loss.
I've been following several mid sized multi deals from bankrupt syndicators. These deals have been sitting on the market for ~100 days at their debt balance and the lenders are refusing to take a loss. At what point will these lenders cave and sell to the highest bidder?
Sorry if I'm being obtuse but isn't this the obvious play? If you're eventually going to be underwater on your mortgage and unable to cover debt service, the smart thing to do would be to sell before you have to short sell or foreclose.
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