Not for profit with special use collateral with environmental issues
Loan was originated by a bank my previous employer acquired through a FDIC Loss Share Acquisition. The borrower was a church that had acquired its location (collateral) several years ago and that locations was constructed on top of an old landfill. Methane vents were onsite. Across the street from the collateral was a methane burner that would activate periodically when methane levels were too high. There were settling issues due to the compaction of the landfill material and a portion of the sanctuary was beginning to crack and separate as well as buckling of sidewalk portions. In essence, the collateral was worth $0 in an REO situation, and the bank was not interested in foreclosing on a legitimate church that was cooperative and trying to do all they could to service the debt.
Operationally the congregation had experienced a lower attendance due to the movement of some of the senior leadership. In addition, the overall economy was struggling not allowing the giving units to tithe what they had historically. Multiple Forbearance agreements were negotiated and executed requiring minimal payments as the borrower explored specialized lending. I had environmental reports updated and engineering reports completed about the structural issues. After a few years of working with the borrower we were able to identify a financing source. The financing source packaged and marketed a bond issuance to the congregation and secondary market. Through this bond issuance the bank was paid 100% of net proceeds amounting to approximately $500M more than other takeout offers and our appraisals. The congregation ended up being able to own their own church, the bank minimized losses.
Large raw land deal with contentious borrower/guarantors
Acquired via an FDIC Loss Share bank acquisition- Loan was secured by another loan that was secured by undeveloped residential land outside of an area where demand existed. The loan matured and the borrower demanded unreasonable terms for renewal, the borrower refused to curtail the loan based on the bank valuation. The guarantors had the ability to add collateral or curtail the loan balance however refused to do so. Extending the loan “as is” was determined to be negligent and litigation was elected the best option due to the lack of cooperation and facts of the case.
We appointed a receiver of the entity that owned the loan that had pledged the secured secondary loan as collateral. The goal was to apply the appropriate pressure by having the receiver demand a vast amount of disclosure as well as begin to market the property despite the borrower’s strong objection to the sale of the property as their position was that a 5 year hold would result in a very large return. A few months later the loan was paid off in full, with interest and fees. Borrowers’ belief that they had the equity in the property and the legal difficulties with filing a ch.11 on an entity that only owns a loan was in the bank’s favor and was undoubtedly a better outcome than the “kick the can down the road” strategy.
Furniture sales company
Distributor of office furniture for Southwest and Northwest USA, mainly beholden to a single distributor and subject to a distributor agreement. Company began to struggle with cash flow and needed to borrow more money. My employer funded an additional line due to a long term relationship with the borrower and historical cash flow that was recently exacerbated by the company’s expansion into the Northwest market. A year later the borrower requested additional funds, the bank analyzed it’s collateral which included all company assets and no real estate.
We did our research and saw the large amount of fees the borrower was generating for the primary distributor and determined that they would be the most motivated to lend money and keep its fees coming in. The distributor did just that, they took a second position on the company assets as collateral and ended up lending an additional $2.5MM. The borrower hired a consulting firm that pointed our many poor practices and controls within the company. They did projections and showed how their changes would save millions of dollars over the next several years, however the borrower needed even more money at this point to keep their doors open. We had a very reasonable borrower/guarantor, he reluctantly admitted he reacted too slowly and had not run the company well over the past few years. He agreed to an orderly liquidation. Most of the collateral was in the form of AR’s and the rest of the assets the company had were WIP or were borrowed from the distributor as show pieces. After analyzing what type of oversight would be needed to make sure the bank was getting all the AR’s and net proceeds from a small amount of liquidation of tangible assets it was determined the distributor in second lien position was the most; motivated, capable, and staffed to collect the AR’s, work with installation vendors to complete projects, and do as efficiently as possible to reduce their loss. I worked closely with their Accounting staff, as well as a Financial Advisor we had the borrower retain to provide additional oversight and impartial reporting to the bank. The bank was paid in full after approximately 4 months of making sure AR’s were collected and WIP was completed. This was the best outcome for all parties. The cooperative borrower minimized his future obligations by agreeing to this most efficient strategy.
Non-branded hotel located on border town in Southern Arizona
This credit was another asset acquired via and FDIC Loss Share Acquisition. The borrower/operator passed away shortly prior to our acquisition of the loan. The collateral was a 97 room motel in a border city with Mexico. The loan was put into receivership so the operation could be maintained and marketed. The Initial receiver was appointed by senior management and after 18 months of egregious billings and the property falling further into disrepair the credit was transferred to me to manage the resolution. I replaced the receiver and the initial report from the new receiver outlined many issues; overall neglect of the property, illegal activities taking place on the property, severe disrepair of the roof with several rooms out of service due to leakage, incompetent staff, under qualified management, terrible reputation and lost their flag due to the deterioration of the operation and facility. Offers had come in to buy the property for between $400M to $500M. Working with the new receiver we; replaced management, fixed the roof, removed asbestos, exterior improvements, brought offline rooms back online, replaced missing furniture, and completed various other improvements. My follow up visits to the property reflected efficient use of funds and dramatic improvement for the dollars spent. Once the roof was fixed the rest of the building could be put back together and marketed appropriately. There was a news article in the local newspaper talking about how “new ownership” had really turned the property around. All told approximately $400M was spent on the improvements outlined above, however we ended up selling the property for $1.3MM.