That's 'Interest'ing
May 31, 2022
Partner | Real Estate
Law Clerk | Real Estate

When the interest rate on a mortgage financing is not fixed, the amount that a borrower may be required to pay may fluctuate depending on changes in the underlying index to which the “margin” or “spread” is tied. While a lender may be comfortable with its underwriting of a financing and the ability of its borrower to service its debt at closing, if the underlying index of a floating rate loan changes over time, the lender’s comfort and the ability of its borrower to service its debt will obviously change. To combat against interest rate volatility, borrowers and lenders usually agree to hedge the interest rate against the uncertainty in the market for floating rate loans. The most common form of such hedging is an “interest rate cap.”

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Associate | Real Estate

Following our recent series on “green loans,” we now want to focus on sustainability-linked loans (“SLLs”), which also emerged alongside green loans as a result of the movement towards greater awareness and improving environmentally and socially beneficial outcomes in the way corporates and lenders effect their lending, investment and other business decisions. Whilst green loans and SLLs are similar in their macro mission towards environmental and social sustainability, there are some important differences in their approach.

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The recent English High Court decision of Lombard North Central Plc v European Skyjets Ltd [2022] EWHC 728 (QB) provides some important guidance for lenders and restructuring professionals when communicating with distressed borrowers. There are significant implications here for real estate finance.

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Here is a rundown of some of Cadwalader's recent work on behalf of clients.

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