#BAD BOYS BAD BOYS WHAT YOU GONNA DO CODE#
#BAD BOYS BAD BOYS WHAT YOU GONNA DO TRIAL#

According to its terms, this вЂњbad boyвЂќ provision would be triggered by a voluntary bankruptcy filing by the borrowers. As a condition to the primary lenders agreeing not to foreclose on the property, the mezzanine lender unconditionally guarantied вЂњpayment and performance of obligations or liabilities of borrower to lender to the extent such obligations and liabilities arose after acquisition of all or any part of the ownership interest in borrowers byвЂќ the mezzanine lenders. In late-2007, needing additional financing, the borrowersвЂ™ equity owner obtained a mezzanine loan in the principal amount of $31.5 million, secured by a pledge of 100% of the membership interests in the Borrowers. loaned $107 million to a group of investors for the purpose of acquiring office buildings in the Virginia suburbs of Washington, DC. In mid-2007, UBS Real Estate Securities Inc. March 8, 2011), the Supreme Court of New York found a вЂњbad boyвЂќ guaranty valid and enforceable. Garrison Special Opportunities Fund L.P., Case No. In UBS Commercial Mortgage Trust 2007-FL1 v.

#BAD BOYS BAD BOYS WHAT YOU GONNA DO TRIAL#

Two recent trial court decisions in New York, however, shed some light on how вЂњbad boyвЂќ guaranties stand up when challenged. There isnвЂ™t much case law on вЂњbad boyвЂќ guaranties because, until the most recent crash of the real estate markets, they were not frequently triggered and even less frequently challenged in court. These provisions are designed to discourage the borrower or the guarantor from engaging in any of the вЂњbad boyвЂќ acts.

#BAD BOYS BAD BOYS WHAT YOU GONNA DO CODE#

In most cases, the guaranty operates in two steps: (1) upon the occurrence of certain enumerated events (for example, filing a voluntary petition under the Bankruptcy Code or further encumbering the collateral), the previously non-recourse obligation becomes вЂњfully recourseвЂќ and (2) upon conversion, the guaranty вЂњspringsвЂќ into existence and the guarantor (typically the borrowerвЂ™s principal) becomes fully liable for the debt.

Although these guaranties vary in their terms, typically they involve the borrowerвЂ™s principal(s) guarantying the borrowerвЂ™s obligations. One way in which parties achieve these somewhat competing goals is through the use of non-recourse carve-out guaranties, or as they are more affectionately referred to, вЂњbad boyвЂќ guaranties. In the complex world of structured real-estate finance, lenders are constantly trying to reduce their risk exposure while borrowers seek to reduce their cost of capital. Contributed by Christopher Linden and Will Hueske

Bad boys bad boys what you gonna do