Have heard borrower's having a PG on the top x% of a loan amount in recent convos I am having with debt brokers. I have seen full recourse and situations where full recourse burns off to non recourse upon certain hurdles, but under the scenario of a % of the debt having a PG attached, would that mean in theory that if a $50M senior loan where top 20% has a PG, if the lender had a foreclosure situation and could only recoup $42MM through a note sale, that the borrower would be on the hook for the remaining $8M (up to $10M) to make the lender whole?
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Based on the most helpful WSO content, in a partial recourse loan scenario where a personal guarantee is attached to a percentage of the loan, the borrower would indeed be responsible for that percentage in the event of a foreclosure.
So, in the example you provided, if a $50M senior loan has a personal guarantee on the top 20%, and the lender could only recoup $42M through a note sale, the borrower would be on the hook for the remaining $8M. This is because 20% of $50M is $10M, and the lender was only able to recoup $42M of the $50M loan, leaving an $8M shortfall.
However, it's important to note that the specifics can vary based on the terms of the loan agreement. It's always wise to thoroughly review these details and consult with a financial advisor or attorney if needed.
Sources: Non Recourse Loan - Guarantor Net Worth and Liquidity Requirements?, How to think about Debt for Acquisitions
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