Finance Forum: Current Developments in Real Estate and Commercial Finance
On October 7, 2014, Tom Pinney, Meredith Bieber and Maulin Vidwans presented on hot topics and common issues in real estate and commercial finance at Finance Forum. Finance Forum is a series of programs presented by the Real Estate, Finance, and Bankruptcy and Financial Restructuring Groups of White and Williams. These programs are designed to provide updates on trends and legal developments impacting the industry. We welcome your suggestions for future programs. The following is a short recap of the Forum.
In re Motors Liquidation Company: What Constitutes 'Authorization” Under Section 9-509 of the UCC?
Given the confusion created by In re Motors Liquidation Company with regard to the requirements of “authorization” under the Uniform Commercial Code to terminate personal property liens created by In re Motors Liquidation Company, lenders need to remain diligent in the drafting of payoff letters and lien releases. This may be an instance where less is more. To the extent that lenders permit borrowers or third parties to terminate UCC liens upon repayment, the authorizing language should be very clear that only the liens directly related to the repaid financing are terminated. Alternatively, lenders should consider preparation of the UCC-3 termination statements, or actual termination of the liens, in house.
Kessler Revisited: Recent Amendments to the Pennsylvania Mechanics’ Lien Act and How They Affect Title Insurance Coverage
Recent amendments to Pennsylvania’s Mechanics’ Lien Law provide much needed relief to lenders extending construction loans where work on a project has started before the closing of the loan. However, the preference should always be that work starts after the loan is closed and the lender’s mortgage has been recorded. When this is not possible, lenders need to be certain that:
- At least 60% of the loan proceeds are intended to pay or will be used to pay the “costs of construction” as defined in the revised Mechanics’ Lien Law; and
- The title company will provide full up-front coverage insuring the mortgage against lack of priority of the mortgage over mechanics’ liens.
Unitranche Loan Financing: What it is and Why it is Gaining Popularity with your Borrowers
Unitranche loan financing is a hybrid loan product with growing popularity among middle market companies combining senior debt and subordinated debt tranches into one consolidated loan. The benefits of unitranche financing are reduced closing and administrative costs, certainty of closing, expedited speed of transaction, less syndication risk, lower debt service costs and simplicity of decision making. There are some bankruptcy risks to unitranche financing, including enforceability of subordination provisions, sales of collateral, and plan voting and classification of claims.
For more information on real estate and commercial finance, please contact Maulin Vidwans (firstname.lastname@example.org | 215.864.6369), Tom Pinney (email@example.com | 215.864.6371) or Meredith Bieber (firstname.lastname@example.org | 215.864.6292).