Interest rate protection is a hedging tool commonly used by lenders to mitigate the risk that an increase in variable interest rates could inhibit a property’s ability to service its debt.
As COVID-19 lockdowns are sustained and business activity deteriorates, loans secured against properties which are reliant on certain business activities will be affected, both from loan covenants and ultimately value perspective. In particular, COVID-19 could exacerbate valuations for sectors that were already seeing signs of distress, such as the retail sector.
On May 7, 2020, New York State Governor Andrew Cuomo issued Executive Order 202.28 (the “New Order”) to provide additional relief to renters impacted by the COVID-19 pandemic and extended the time periods for certain other protections that had been previously granted to renters and property owners pursuant to Executive Order 202.8 (the “March 20 Order”).
One of the rights a borrower has in a fixed-rate CMBS loan transaction in lieu of prepayment is called defeasance.
Here is a rundown of some of Cadwalader's recent work on behalf of clients.
