Distressed Loans, Restructurings and Workouts

Freeborn’s Workout Group provides assistance to lenders, borrowers and loan and asset purchasers, with everything from drafting and negotiating transactional documentation, prosecuting and defending financial services litigation and bankruptcy and reorganization matters.

Whether providing counsel directly to banks or to those seeking financing from traditional and innovative lenders and investors, Freeborn’s attorneys leverage their years of experience to manage all manners of financing for their clients. Our Workout Group combines the knowledge of multiple practices, including our Corporate Practice Group, Real Estate Practice Group, Litigation Practice Group and Bankruptcy and Financial Restructuring Practice Group. This gives us the ability to handle the full breadth of our clients’ financial issues.

For lenders, we provide a full suite of legal services. This includes general corporate counsel and transactional assistance, such as the development and review of lending agreements, loan restructurings and workouts and debt sales. We also represent lending institutions and investors, including private equity firms, as both plaintiffs and defendants in litigation and arbitration, including foreclosures and sales under the Uniform Commercial Code. In the event a lender becomes a creditor due to a borrower’s bankruptcy, we help navigate our clients through the process to mitigate any potential losses.

Similarly, we represent a variety of borrowers across multiple industries, including owners and developers in construction and real estate, food manufacturers, transportation companies and healthcare organizations, among many others. Our banking and finance counsel includes general transaction assistance – including contract review and negotiations – as well as litigation and bankruptcy support.

Our Workout Group spans nearly every practice and office at Freeborn and has the capability and experience to assist both lenders and clients throughout the United States.  More specifically, the Workout Group attorneys have assisted clients with:

• Structuring and documenting conventional and unconventional loans
• Selling and acquiring loans secured by REO properties
• Resolving disputes between lenders and borrowers, both before and after the filing of litigation, related to forbearances, modifications, short sales, deeds-in-lieu of foreclosure and other out-of-court settlements and agreements
• Representing parties in bankruptcy and state and federal court disputes, including real estate and UCC foreclosures, receiverships, landlord/tenant disputes, relief from stay proceedings and both voluntary and involuntary bankruptcy filings

Transactional Restructurings and Workouts:

Whether representing borrowers, creditors, landlords, tenants, developers, investors or acquirers, financial distress situations can often be resolved more favorably outside of litigation or bankruptcy.  We have a depth of experience representing financially distressed entities and their creditors, as well as opportunistic acquirers and investors, in financial workouts, restructurings, and acquisitions, workouts or dispositions of distressed real estate and other assets. 

Depending on the economic climate, loans, purchase/sale agreements, leases, partnership agreements, and other real estate and related transactional documents require amendments and workouts. The process often begins with a mutually satisfactory Pre-Negotiation Agreement (PNA) that enables negotiations and includes such items as the confidentiality and non-binding effect of the statements, claims, and information made and revealed in the post-PNA negotiation process.  

The PNA and substantive documents that follow often require sophisticated legal expertise involving real estate financing, leasing, acquisition and sale, development, construction, zoning and other governmental matters, liens, income and real estate taxation, bankruptcy and creditors’ rights, and foreclosures (and deed-in-lieu thereof) and other related litigation. Our representations have included parties on all sides of those categories, and we believe that this depth provides us with the broad and deep capabilities that our clients want and deserve.

Recent out-of-court restructuring experiences include:

• Represented the principals of a large Midwestern homebuilder and defended litigation claims brought by eight different banks.  Our efforts resulted in the extinguishment of more than $25 million of guaranty claims brought against the principals.
• Representation of private multi-family REIT and affiliate fund in acquiring approximately 10,000 "work force" apartment units across multiple states in over 100 separate distressed acquisition transactions consisting mainly of non-performing secured loan portfolio purchases and subsequent judicial foreclosures, consent foreclosures, deeds-in-lieu of foreclosure, forbearance and deed-in-escrow arrangements.
• Representation of developer in connection with the restructuring of debt and equity interests involving a 500,000 square foot mixed use project in Arlington Heights, Illinois.
• Representation of developer in connection with the restructuring of debt and equity interests involving a residential facility, industrial facility and municipal owned lands in Mundelein, Illinois.
• Represented a home developer in connection with the negotiation and closing of a deed-in-lieu of foreclosure transaction involving approximately 100 homes sites located in Wisconsin.
• Represented a Chicago-area luxury homebuilder in the restructuring of existing secured debt obligations and a substantial infusion of capital by new investors.
• Chaired the negotiation and documentation of multiple deed in lieu and forbearance transactions for various middle market bank clients. 
• Representation of various purchasing entities in connection with the acquisition and transfer of certain real estate secured loan portfolios/promissory notes.
• Represented loan portfolio acquirer in negotiating and documents a multi-loan restructure and related deed in lieu in escrow transactions.
• Represented an ESOP borrower in the refinancing of an $85 million senior, secured-term and revolving debt facility from a syndicate of lenders.

These workout strategies, while often employed outside of litigation or bankruptcy, may also continue as viable options once a lawsuit or bankruptcy is filed.  We have the experience to manage this migration into court when necessary.

Financial Services Litigation

When conflicts arise among lenders, investors, borrowers and other parties, including lien claimants, our deep bench of experienced litigators can help swiftly resolve disputes and mitigate risk exposure so that your business can continue with minimal interruption.  We aggressively advocate for our clients’ positions in conflicts arising from loans, trades, transactions and financial products. In addition to the standard actions to foreclose on real estate security and collect on unpaid notes and guarantees, our experience includes claims related to alleged mortgage fraud, lender liability, replevin and detinue actions based on non-real estate collateral, UCC claims and foreclosures of security interests, claims pertaining to bad checks and forged third-party endorsements, municipal violations and zoning claims on both properties securing bank loans and OREO properties, claims bought by tax buyers seeking tax deeds, and litigating insurance claims based on damages to OREO properties. Additionally, we represent receivers and obtain receivers for property securing loans or, alternatively, obtain possession for banks as mortgagees in possession.

Our real estate and construction attorneys, in conjunction with the members of the Bankruptcy and Financial Restructuring Practice Group, represent financially distressed debtors and their creditors, as well as opportunistic acquirers and investors, in financial workouts, restructurings, acquisitions and dispositions of distressed real estate. We also provide related counsel on tax planning for distressed properties, land use and zoning issues, and leasing.

With regard to receiverships, we represent receivers and trustees in cases involving properties, companies, assets and estates varying from hundreds of thousands to hundreds of millions of dollars. Our engagements have included enforcement cases brought by government agencies such as the Illinois Secretary of State, Attorney General, Federal Trade Commission, Commodities Futures Trading Commission and Securities and Exchange Commission. These services include litigation and counsel involving the appointment of receivers, lien placement and enforcement, discharge of receivers, negotiation of bonds for receivers, court-approved sales of both real and personal property, public auctions, and defense of claims and lawsuits brought against receivers.

Representative Matters:

• Successfully prosecuted complex commercial mortgage foreclosure action on large, multi-family project including defense of dozens of lien claims.
• Prosecuted mortgage foreclosure actions on behalf of lender client in three different states against the same borrower which resulted in a complete recovery, including default and regular interest and attorneys’ fees.  One of the cases resulted in an appellate decision in favor of the lender and all of the fees associated with the appeal were also recovered.
• Successful representation of a closely-held real estate development company in nationwide restructuring/workout efforts that began with negotiations with lenders to restructure debt obligations and led to litigation to protect assets, honor estate plans, and recoup funds based on malfeasance by internal employees, business partners, and vendors. Achieved favorable deals to restructure debt and litigation outcomes in multiple jurisdictions across the country.
• Prevailed on summary judgment on behalf of the firm’s commercial mortgage lender client in multiple cases brought by borrowers that attempted to challenge the enforceability of prepayment premium provisions in their loan documents.
• Several, multi-jurisdictional recovery matters, clawback matters and fraud investigations including work in Greece, Isle of Man, BVI, Panama, Hong Kong, Switzerland, UK, Jersey, the Middle East, Bangladesh, Ukraine and others.

Bankruptcy and Financial Restructuring

Whether providing counsel directly to banks or to borrowers needing to re-negotiate their loans or seeking replacement or new financing from traditional and innovative lenders and investors, Freeborn’s attorneys leverage their years of experience to manage all manners of financing for their clients. Our Bankruptcy and Financial Restructuring Group works in conjunction with attorneys in multiple practices, including our Corporate Practice Group, Real Estate Practice Group, and the Litigation Practice Group. This gives us the ability to handle the full breadth of our clients’ financial issues.

For lenders, we provide a full suite of legal services. This includes general corporate counsel and transactional assistance, such as the development and review of lending agreements. We also represent lending institutions and investors, including private equity firms, as both plaintiffs and defendants in litigation and arbitration or in participation disputes between lenders. In the event a lender becomes a creditor due to a borrower’s bankruptcy, we help navigate our clients through the process to mitigate any potential losses.

We represent a variety of borrowers across multiple industries, including owners and developers in construction and real estate, healthcare, food manufacturers, transportation companies and healthcare organizations, among many others. We provide clients with transaction assistance – including contract review and negotiations, workout and forbearance agreements, asset sale documents, or assignments for the benefit of creditors – as well as litigation and bankruptcy support.

Freeborn advises companies in financial distress as well as lenders and creditors on issues related to bankruptcy, taxes and restructurings. Our services in this area include representing debtors and creditors in out-of-court workouts, official and unofficial creditors’ committees in court proceedings, and workouts. We also represent debtors, secured and unsecured creditors, and other parties in standard bankruptcy court proceedings as well as proceedings where there are claims of mismanagement and fraud, fraudulent transfers, relief from the automatic stay, use of cash collateral, commercial contract disputes, assessment of lease value and breach of fiduciary duty. Additionally, we advise the corporate, real estate and litigation attorneys in the restructuring and bankruptcy arenas to achieve the best results for our client.

• Representation of the equity holder guarantor and non-debtor operating subsidiaries of an entity which is in a chapter 11 bankruptcy, in negotiations with the lender and the largest unsecured creditor.  Our clients are distributors of petroleum and food products, among other things.
• Negotiated a global resolution for the owner of a large shopping plaza in Wisconsin, leading to the dismissal of a chapter 11 case of the entity which owned the real estate and an individual chapter 7 case of the owner, both of which were filed by other law firms.
• Redrafting the operating agreement of an entity which manages shopping malls throughout the country in order to provide more flexibility in renegotiating debt or filing a bankruptcy if necessary.
• Representation of the owner and guarantor of a chain of high end eye glass retail stores in negotiating the repayment of secured debt while the company was in chapter 11 bankruptcy.
• Successfully moving for the appointment of a chapter 11 trustee on behalf of lenders, in order to gain control of and sell a borrower’s collateral assets.
• Forcing the involuntary bankruptcy, liquidation, and federal criminal investigation of a major real estate developer on behalf of the near largest office property developer and management company in the US, leading to full recovery of amounts due to our client.
• Regularly defending and pursuing actions against directors and officers and entities for recovery of fraudulent transfers.