• Distressed Asset

    We represent clients at every phase of the real estate cycle, including the inevitable downturns. Today’s challenging economic, real estate and credit market conditions pose great risks for investors. However, with risks come opportunities for those with the experience and skill to evaluate, manage and exploit them. We partner our experience, expertise and market knowledge with our clients’ to take full advantage of the distressed asset marketplace.  

    The Best Mix of Core Competencies
    As one of the country’s leading advisors to financial institutions and private equity investors, we have decades of experience representing lenders, borrowers, investors and other participants in structuring distressed asset transactions and in negotiating and resolving the unusually complex legal issues relating to such deals.

    We offer a full spectrum of services in the distressed asset arena. Among our clients are:

    • Distressed asset and loan portfolio sellers in deal structuring and sales strategy, seller due diligence and organization, market evaluation, deal negotiation, and closing and post-closing matters, including litigation by borrowers and co-lenders.
    • Distressed asset and loan portfolio buyers in risk analysis and due diligence, including land use and entitlement due diligence; asset-level business planning, contract negotiation, closing and conveyancing; and post-closing matters, including asset management, restructurings and/or enforcement.
    • Financial institutions in restructurings of mezzanine and senior debt facilities and equity investments.
    • Lenders and borrowers in workouts and restructurings of loans (both portfolio and securitized loans), including loan modifications, loan forbearance agreements, deeds in lieu of foreclosure, discounted payoffs and other strategies.
    • Creditors in foreclosures, deeds in lieu transactions, bankruptcies, creditors’ rights proceedings and lender liability defense, as well as all aspects of real property litigation, including mechanic’s lien and stop notice litigation, claims against title insurers and other litigation.
    • Owners and operators of real estate assets in restructurings of equity, partnership restructurings and ground lease workouts.
    • Financial institutions in loan portfolio purchases and sales and related governance matters, such as compliance with FDIC audit and reporting requirements.

    Loan Portfolio Transactions
    For nearly 20 years we have represented buyers, sellers and financiers in the purchase, sale and financing of mortgage and other loan portfolios, closing over 100 such transactions. Drawing on that experience, we help clients develop asset acquisition and disposition strategies that suit their business objectives and risk tolerance, and then work to implement those strategies throughout the contract negotiation and drafting, due diligence, pricing, conveyancing and post-conveyancing stages.

    Our work on both the buy and sell sides of portfolio transactions helps us stay abreast of the competitive landscape, the evolving standards and criteria by which clients evaluate investments, and the latest market terms. In other words, whether serving as buyer’s or seller’s counsel, we are able to anticipate the other party’s concerns and create transaction structures to address them.

    Workout, Restructuring and Bankruptcy
    Our workout restructuring practice covers the representation of all creditor and investor interests in loan recovery and debt restructuring and inside and outside of bankruptcy, with particular emphasis on the representation of institutional clients. We help lenders resolve problems that arise in managing foreclosed real estate, servicing mortgages and administering loan portfolios. We also advise lenders with respect to the various risks associated with the holding, managing and disposal of troubled real estate, particularly lender liability, environmental and financial regulations, and the management of those risks.

    We have negotiated and documented debtor-in-possession financing transactions for debtors and lenders, and represented numerous clients in the acquisition and sale of distressed assets and businesses in Chapter 11 and Chapter 7 bankruptcy proceedings, from straightforward 363 sales transactions to highly contentious prepackaged reorganization plans.

    CMBS Transactions
    The management and workout of loans transferred to pooled investment vehicles, such as mortgage-backed securities trusts, have their own complexities. The securitization structure, applicable REMIC, and sometimes grantor trust, tax considerations and contractual limitations tend to restrict the choices available to borrowers and lenders, as well as adding layers of procedural formalities to the financial analysis and communications among parties. 

    Our lawyers help borrowers, servicers, investors, trustees and other parties to securitized commercial mortgage loan transactions to understand how the pool-level governing documents interrelate with the underlying loan documents. 

    Manatt in Action

    Loan Purchase and Sale Transactions

    • A major investment bank in its acquisition of mortgage loans and REO properties valued at several billion dollars and located around the world. Our team evaluated over 300 loan and REO assets – more than 500 properties in just four weeks – handling title, documentation, bankruptcy, transfer restrictions and other matters. Contract negotiations were handled simultaneously with the conduct of due diligence, and the conveyancing required the negotiation and execution of thousands of closing documents. The entire transaction was successfully concluded in only four months.
    • A regional bank in the sale of a portfolio of 16 nonperforming loans secured by residential real estate properties located in California and other Western states. The sale was conducted through an auction involving a limited number of prequalified buyers, and the net price to the selling institution turned out to be something of a high-water mark (subsequent portfolio sales having sold at much greater discounts).
    • A real estate investor in the acquisition of a note secured by a lien on a high-rise residential condominium subject to a commercial condominium regime. We then represented our client in foreclosing on the underlying real property collateral, including mounting a successful defense against lender liability claims asserted by the borrower’s principal.
    • A hedge fund in a bid for the assets of a failed financial institution that was being marketed by the FDIC via an online auction.
    • A regional bank in designing and offering to its borrowers a structured program of discounted payoffs and loan purchases for performing and nonperforming loans. We prepared prenegotiation and confidentiality agreements, offer letters and DPO and LPA agreements, and acted as the bank’s primary borrower contact point to negotiate and close each individual transaction. We have closed over 25 transactions under this program.
    • A real estate developer in the acquisition of a note secured by a lien on a retail development site. We then represented our client in foreclosing on the underlying real property collateral and defending against claims asserted by the borrower’s principal.

    Negotiated Workouts

    • Lowe Enterprises and its affiliates in the restructuring of $330 million in debt secured by the Terranea Resort, a 580-room condominium hotel resort on the Southern California coastline. We had previously represented Lowe as the developer in obtaining a construction loan from the now-defunct Corus Bank. Corus was on the FDIC watch list for 13 months before the agency seized its assets. We worked with the FDIC to extend and modify the construction loan, and after the agency sold the Corus assets to an investor group led by Starwood Capital, we worked with Starwood to restructure the outstanding construction loan and a mezzanine loan.
    • GMAC ResCap in the workout of troubled assets in its loan and REO portfolios, including the disposition of numerous properties and the sale of loans, many of which are secured by real estate assets located in a number of Western states or are part of a master loan facility covering multiple projects in various stages of development. This work requires taking a multidisciplinary approach, and we have involved Manatt’s real estate, land use, and workout and bankruptcy attorneys.
    • A shopping center developer in the restructuring of a regional mall project in California’s Central Valley. This included the renegotiation of ground leases, securitized debt contracts and partnership agreements.
    • The sponsor in the dissolution of a multifamily real estate investment company. This required creating an exit strategy for the individual principals that included their complete release from any and all liabilities and the receipt of a separation payment, and involved extensive negotiations with secured debt holders and equity investors.
    • U.S. Bank in restructuring a land development loan secured by residential lots and a golf course in Arizona. Our client was part of a syndicate of lenders holding notes totaling $90 million. As part of the restructuring, personal guarantees were released for new consideration and a general release of the syndicate lenders was obtained, and the original notes were sold back to the borrower at a discount following a recapitalization of the borrowing entity using an outside investor.
    • Several pension fund advisors in the acquisition of “broken” or “fractured” condominium deals, involving complex due diligence, clearance of mechanics' liens and other clouds on title, and resolution of bankruptcy and other issues arising out of the insolvency of the project’s original developers.

    Litigation

    • A financial institution as defendant in a breach of contract action in connection with the proposed sale of a nonperforming loan. We reached a favorable settlement before trial in which our client paid no damages.
    • A financial institution in connection with a post-closing lender liability claim against the current owner of a portfolio of loans and our client, the portfolio’s original owner.
    • A financial institution in an action arising from a failed residential development project in Southern California. The case presented a number of complex issues relating to whether the bank perfected its security interest in all the intended loan collateral (judgment against borrower was obtained and placement of all collateral security under the control of the bank or its designee is pending); mechanic’s lien, stop notice and other third-party claims against the project and/or bank (all successfully resolved); the appointment of a receiver to control and stabilize the project (receiver in place); claims against bonding companies regarding the completion of infrastructure improvements (settlement negotiations under way); and claims by the bank against its title insurer (scheduled trial date approaching).

    Attorneys & Professionals

    Email
    Name
    Office
    Phone
    Badkar, Dinesh R. Los Angeles 310.312.4266
    Bassak, Andrew A. San Francisco 415.291.7449
    Brunsten, William S. Los Angeles 310.312.4109
    Duchesneau, Peter Los Angeles 310.312.4209
    Eastman, James F. San Francisco 415.291.7436
    Edwards, Steve Orange County 714.371.2546
    Eller, Robert M. Los Angeles 310.312.4338
    Faden, Neil S. New York 212.830.7181
    Fitzgerald, Donald J. San Francisco 415.291.7420
    Gantz, Clayton B. San Francisco 415.291.7600
    Grumer, Carl L. Los Angeles 310.312.4149
    Hallem, Timi Anyon Los Angeles 310.312.4217
    Kallick, Ivan L. Los Angeles 310.312.4152
    Marshall, Ellen R. Orange County 714.371.2508
    Muller, Tom Los Angeles 310.312.4171
    Pearlstein, Marv San Francisco 415.291.7439
    Reichwald, Harold P. Los Angeles 310.312.4148
    Rochman, Harvey L. Los Angeles 310.312.4104
    Taylor, Joshua C. San Francisco 415.291.7446
    Thompson, Justin X. Los Angeles 310.312.4271

    Distressed Asset

    Selected Clients

    • Bank of the West
    • Central Pacific Bank
    • Citigroup
    • GMAC ResCap
    • Lowe Enterprises
    • UBS
    • U.S. Bank
    • York Capital

     

    Articles

    06/01/2010Selling Distressed Assets