Gemma assists clients in corporate trust representation, commercial financing transactions, debt restructurings, loan workouts, and the pursuit of creditor remedies in bankruptcy and other insolvency proceedings. During law school at the University of Minnesota, Gemma served as student director of the university's Bankruptcy Clinic, where she represented clients in Chapter 7 bankruptcy cases, adversary proceedings to discharge student loans, and judgment removal.

Meritas members in attendance will hear a dynamic bankruptcy case law panel discussion, an in-depth exploration of Subchapter V of the Bankruptcy Code, and a presentation by a recently retired U.S. Bankruptcy judge.

Founded in 1990, Meritas is the premier global alliance of independent law firms. Maslon, the Minneapolis representative, is a founding member of the network.

For more information, go to 2025 Bankruptcy, Insolvency & Creditors Rights Group Meeting.

Thursday, Feb. 27 | 1–5 p.m.

Location:

The Collaborative in Capella Tower
225 South Sixth Street
Minneapolis, MN 55402

Panel 1 | State of the Credit Markets

This panel will discuss current trends, challenges, and opportunities that are shaping the landscape of credit markets. Key topics will include the impact of changing capital requirements, interest rates, inflation, and the emergence of private lenders on borrowing costs, credit risk and default trends, and the evolving landscape of borrowers’ access to credit.

• Moderator:
  • Erin Snyder, Associate, Maslon LLP

• Panelists:
  • Hemal Gundecha, SVP & Senior Credit Director, Bremer Bank
  • Michael Lebens, SVP & Corporate Banking Leader, Associated Bank
  • Mark Klos, Partner, Maslon LLP

Panel 2 | Hot Topics in Distressed Loans

This panel will discuss the current state of the market, current trends in workout transactions, the status of various high profile enforcement actions, and panelists' thoughts about the coming 12 to 18 months as it relates to distressed loans. Most workouts are conducted out of court, and panelists will describe what we can expect to see in the near future. The panel will also share their thoughts about state court enforcement actions and bankruptcy proceedings in the current environment.

• Moderator:
  • Michael Rosow, Partner, Maslon
• Panelists:
  • Barry Fife, EVP and Chief Credit Officer, Choice Bank
  • Darin Kragenbring, SVP and Relationship Manager, U.S. Bank
  • Jason Reed, Partner, Maslon

AGENDA

1–1:30 p.m. | Registration and Networking

1:30–2:30 p.m. | State of the Credit Markets

2:30–2:45 p.m. | Break

2:45–3:45 p.m. | Hot Topics in Distressed Loans

4 p.m. | Networking Reception

Continuing Education:

Maslon will seek approval with the Minnesota State Board for Continuing Legal Education for 2.0 hours of standard CLE credit.

Questions? Please contact us at info@maslon.com.

This year’s program will kick off in Minneapolis at U.S. Bank headquarters with networking, learning opportunities, and goal-setting activities with bank attorneys and other executive leaders.

“We continue to be impressed by the associates we meet through the Spotlight on Talent program,” said Jim Chosy, senior executive vice president and general counsel for U.S. Bank. “We look forward to meeting and working with the 2025 cohort with the goals of furthering their professional development through unique exposure to our company and the in-house practice and strengthening our relationships with key law firm partners.”

Throughout the year, cohort members will participate in leadership meetings, educational sessions, practice group roundtables, and social activities, and also work with a mentor and have the opportunity to make presentations to the U.S. Bank Law Division. Spotlight participants will strengthen their knowledge of the financial services industry and U.S. Bank’s business and develop relationships with Law Division professionals and cohort peers.

"I'm honored that U.S. Bank has selected me for the Spotlight on Talent program," Carmen said. "I am passionate about the opportunity to connect with other diverse attorneys, develop my understanding of U.S. Bank’s business operations, and build leadership skills under the mentorship of the Law Division."

As a member of Maslon’s Litigation and Financial Services groups, Carmen represents clients in financial services litigation matters such as loan workouts and creditor remedies. When representing corporate trustees, she effectively partners with clients to navigate concerns related to administration issues, claims by and against the trustees and other parties, RMBS trust claim litigation and settlements, trust instruction proceedings, and other matters—through appeals. When representing commercial lenders, she is an experienced navigator of loan workouts and creditor remedies. She has also represented receivers and assignees. Carmen’s practice also includes employment litigation, insurance recovery, and government investigations.

Carmen has led teams as a key or lead associate to resolve a wide range of matters, including a complete defense verdict in a $300 million breach of contract claim and a plaintiffs verdict in a jury trial against a Minnesota municipality. Carmen also took the lead as sole associate on a complex pro bono matter on behalf of an eighth-grade student experiencing discrimination due to his disability, resulting in a highly favorable settlement.

Spotlight on Talent cohort participants have three to six years of experience and practice in an area relevant to legal services applicable to U.S. Bank business.

At the federal level, the Fifth Circuit in a case involving Serta Simmons Bedding, L.L.C. (“Serta”),[1] and Judge Marvin Isgur from the U.S. Bankruptcy Court for the Southern District of Texas in Wesco/Incora, each issued rulings narrowly construing debt documents and appearing to halt the prior trend of courts supporting uptier transactions.

On the same day the Serta Decision was issued, the New York State Supreme Court (Appellate Division, First Department) issued a decision upholding a similar but distinguishable uptier transaction by Mitel Networks (International) Limited and related entities (“Mitel”).[2] Each decision pays particular attention to the specific language in the underlying debt documents as well as the mechanics of the transaction. These decisions suggest that the ultimate viability of any uptier transaction is reliant on the language of the governing documents as well as the structure and mechanics of the restructured deal rather than judicial tolerance.

Uptier Transactions

An uptier transaction at its core involves the amendment of credit or debt facility by a borrower and certain of its financial creditors to allow the issuance of new super-priority debt. As the Serta Decision describes, “[b]ecause a majority of lenders in the existing facility must typically consent to such an amendment, the borrower purchases consent by allowing these lenders to exchange their existing debt for new super-priority debt, often at an above-market price.”[3] In an uptier, the borrower only needs a majority as opposed to unanimous consent to complete the transaction. This allows the borrower to play groups of creditors off of each other and avoid dealing with holdouts.

Additionally, the borrower may be able to obtain additional financing, while often decreasing its overall liabilities. Participating lenders or debt holders seek to improve their position by exchanging (now) junior debt for more senior debt “which is advantageous in bankruptcy where debt claims are often resolved by seniority.”[4] The primary controversy of uptier transactions is that the costs of the transaction “are born entirely by the minority lenders, who end up with subordinated debt worth less than before.”[5]

Serta Decision

In 2020, Serta entered into an uptier exchange with a majority of its first- and second-lien lenders to issue more than $1 billion in new super-priority loans. This was accomplished by Serta buying back debt from certain participating lenders (the “Prevailing Lenders" on a non-pro-rata basis through an allegedly “open-market” purchase (the “Serta Uptier”). The operative credit agreement at the time of the Serta Uptier (the “2016 Credit Agreement”) required pro rata distributions to lenders in the same class with certain exceptions.[6] The first exception was a Dutch auction open to all lenders on specific terms set forth in the agreement. The second exception permitted a lender to choose to assign or sell its rights under the 2016 Credit Agreement to Serta or its affiliates through an open market purchase. The phrase “open market purchase” was undefined in the 2016 Credit Agreement.

The Serta Uptier involved the Prevailing Lenders funding $200 million of new money and receiving new first-out super-priority debt. Additionally, these same Prevailing Lenders exchanged on a cash-free basis $1.2 billion of their existing first- and second-lien loans for approximately $875 million in second-out, super-priority debt. Each of these new forms of debt ranked senior in priority to the approximately $1 billion of first-lien and second-lien term loans that remained under the 2016 Credit Agreement.

Shortly after closing the Serta Uptier, the borrower and the Prevailing Lenders: (a) amended the 2016 Credit Agreement to permit the Serta Uptier; (b) labeled the Serta Uptier an “open market purchase”[7]; and (c) agreed that Serta would indemnify the Prevailing Lenders for future litigation regarding the Serta Uptier.

Lenders that were not chosen to participate in the Serta Uptier (the “Excluded Lenders”) brought suit in the Southern District of New York[8] arguing that the Serta Uptier was not an “open market purchase” as contemplated by the 2016 Credit Agreement. If correct, the terms of the Serta Uptier would need to be provided to all Lenders under the agreement, not just the Prevailing Lenders.

Before final adjudication of these claims, Serta and certain of its affiliates filed voluntary petitions for Chapter 11 in the U.S. Bankruptcy Court for the Southern District of Texas in early 2023. Serta, along with certain Prevailing Lenders, filed an adversary proceeding seeking declaratory judgment that the Serta Uptier had not violated the 2016 Credit Agreement. The Excluded Lenders brought breach of contract counterclaims for potential violations of the 2016 Credit Agreement.

The Bankruptcy Court ruled in favor of Serta and upheld the Serta Uptier, finding that the 2016 Credit Agreement provided Serta a great deal of flexibility to enter into liability management transactions under the “open market purchase” provision and that such provision did not require an exchange such as the Serta Uptier to be made equally available to all similarly situated lenders. The Fifth Circuit permitted direct appeal by the Excluded Lenders of the order granting partial summary judgment in favor of Serta.

While the appeal was pending, the Bankruptcy Court confirmed a plan of reorganization over the objection of the Excluded Lenders. In doing so, the Bankruptcy Court held that "based on the overwhelming evidence adduced at trial, the [Serta Uptier] Transaction was the result of good-faith, arm's length negotiations by economic actors acting in accordance with the duties owed to their respective creditors, investors and owners." The Bankruptcy Court went on to hold that "the 2020 [Serta Uptier] Transaction is binding and enforceable in all respects," and entered an order confirming the Chapter 11 plan on June 6, 2023.[9]

The Fifth Circuit decision opens with a recitation of certain principles of corporate finance: “[r]atable treatment is an important background norm of corporate finance. Pursuant to this norm, a borrower must treat all of its similarly situated lenders, well, similarly.”[10] Ratable treatment is such an important norm that it is often described as a lender’s “sacred right” under syndicated loan agreements.[11]

The Serta Decision concludes that the Serta Uptier does not constitute an “open market purchase” under the 2016 Credit Agreement, reversing the Bankruptcy Court. The Fifth Circuit reasoned that “an open market purchase is a purchase of corporate debt that occurs on the secondary market for syndicated loans.”[12] The Fifth Circuit was not persuaded that open markets exist wherever there is competition, but rather that that phrase “open market” necessarily meant that the relevant transaction had to occur on the appropriately designated market for such type of transaction. All possible permitted buyers must have a chance to interact with the sellers, not just a preselected few. “In this case, the relevant product is first-lien debt issued under the 2016 Agreement, and the market for that product is the ‘secondary market’ for syndicated loans.”[13] In light of this ruling, the Fifth Circuit also held that the Excluded Lenders’ counterclaims for breach of contract against the Serta debtors and the Participating Lenders may be viable and remanded such claims to the Bankruptcy Court for further consideration.

Mitel

On the same day as the Serta Decision, the Mitel Decision was entered in the Appellate Division of New York State Court reversing the trial court’s decision to deny motions to dismiss two challenges to a 2022 uptier transaction entered into by Mitel (the “Mitel Uptier”). The Mitel Uptier is similarly structured to the Serta Uptier, including certain cashless exchanges of securities for new super-priority debt.

The relevant exchange in Mitel, however, did not turn on the phrase “open market purchase” but rather whether the company was allowed to “purchase” loans “at any time” in a manner that would permit non-pro-rata payments to lenders in the same class. Section 9.04 of the relevant credit agreement “authorizes the borrower to ‘purchase by way of assignment and become an Assignee with respect to Term Loans at any time.’”[14] Such purchases did not have to be made pro rata, but rather just to the lender tendering its debt.

In the Mitel Decision the court reasoned that nothing in the relevant agreements would suggest that an exchange or refinancing of debt could not be a “purchase” under Section 9.04. Therefore, the debt exchanges that involved only certain lenders, while excluding others, were permitted under the credit agreement. In addition, the Mitel court found that Mitel Uptier did not violate Section 9.08(b)(1) of the credit agreement, which protects sacred rights provisions because such section “only requires the consent of ‘each Lender directly adversely affected’ by a change in loan terms.’”[15] The court reasoned that the exchange of the debt by the participating lenders into super-priority debt, which subordinated the non-participating lenders, only “indirectly” affected such non-participating lenders.

Additionally, the Mitel court took the view that none of the uptier-related amendments actually “waived,” “amended,” or “modified” the terms of the original loans. Instead, the “the participating lenders’ loans were assigned back to the borrower, cancelled, and then replaced with new loans with their own, new terms.”[16]

Conclusion

The Serta Decision, which was widely anticipated, and provides a strong rebuke to the underlying uptier, may signal a reversal in the recent judicial trend of approving uptier transactions. The decision warns that relying on contractual exceptions to the norm of ratable treatment “will often not justify an uptier.”[17] In the same line, however, the court articulates that every contract should be scrutinized on its own terms.

The Mitel Decision, issued on the same day, did exactly that and applied the contractual exceptions to pro rata distributions found in the governing documents. Until such time as a broader judicial consensus on uptier transactions emerges, each transaction’s viability is likely to depend on the specific language of the applicable documents—as well as the relevant secondary sources used when contract language is deemed ambiguous by courts.

[1] In re Serta Simmons Bedding, L.L.C., No. 23-20181, 2024 WL 5250365 (5th Cir. Dec. 31, 2024) (the “Serta Decision”).

[2] Ocean Trails CLO VII v. MLN Topco Ltd., Case No. 2024-00169, 2024 WL 5248898 (N.Y. App. Div., 1st Dep't, Dec. 31, 2024) (the “Mitel Decision”).

[3] Serta Decision at 5.

[4] Id.

[5] Id.

[6] The pro rata distribution provisions of the 2016 Credit Agreement were “sacred rights” under the agreement. Accordingly, any amendment that would alter the pro rata sharing requirement would need to be authorized by all lenders affected thereby, not just a simple majority.

[7] Open Market Purchases are one of the two express exceptions to the pro-rata sharing provision in the 2016 Credit Agreement.

[8] See LCM XXII Ltd. v. Serta Simmons Bedding, LLC, No. 21-03987, 2022 WL 953109 (S.D.N.Y. Mar. 29, 2022)

[9] In re Serta Simmons Bedding, LLC, No. 23-90020, 2023 WL 3855820 at * 13–14 (Bankr. S.D. Tex. June 6, 2023)

[10] Serta Decision at 4.

[11] Id.

[12] Id. at 29.

[13] Id. at 31.

[14] Mitel Decision 2–3.

[15] Mitel Decision at 2.

[16] Id.

[17] Serta Decision at 54.

TMA members may register here: 2024 TMA Annual Conference.

Michael represents clients in loan workouts, creditor remedies, and bankruptcy; financial services litigation; and real estate litigation. He enjoys tackling highly complex cases that require his zealous advocacy in the courtroom, as well as completing transactional work in partnership with banks and other financial institutions to ensure they accomplish their business goals. Michael serves as an at-large member of the TMA Global Executive Board.

"I am very proud to join the board of Achieve Twin Cities," Mike said. "It's a privilege to play an active role in helping a local, impactful organization ensure the next generation of local students have more opportunities to advance and achieve."

Augmenting Mike's leadership, Maslon participates in the STEP-UP Achieve Jobs Program, providing paid internships throughout the summer offering on-the-job experience to inner-city high school students in Minneapolis with particular interest in legal careers.

Mike represents clients in loan workouts, creditor remedies, and bankruptcy; financial services litigation; and real estate litigation. He enjoys tackling highly complex cases that require his zealous advocacy in the courtroom, as well as completing transactional work in partnership with banks and other financial institutions to ensure they accomplish their business goals.

Mike has deep experience guiding workout professionals to implement collections processes and determining how best to enforce their rights as creditors. He also works on the collection of unsecured notes, the enforcement of secured loans, and the acquisition of assets of distressed companies.

TMA members may register here: 2024 Mid-Atlantic Regional Symposium.

Michael represents clients in loan workouts, creditor remedies, and bankruptcy; financial services litigation; and real estate litigation. He enjoys tackling highly complex cases that require his zealous advocacy in the courtroom, as well as completing transactional work in partnership with banks and other financial institutions to ensure they accomplish their business goals.

Michael has deep experience guiding workout professionals to implement collections processes and determining how best to enforce their rights as creditors. He also works on the collection of unsecured notes, the enforcement of secured loans, and the acquisition of assets of distressed companies.

Jill represents borrowers and lenders in commercial lending and clients in all aspects of commercial real estate transactions, including drafting and negotiating loan documentation, title and survey review, commercial leasing, and review of due diligence materials. She has honed her skills through closing a multitude of loan transactions, as well as drafting and negotiating multiple office/warehouse leases and amendments, purchase and sale agreements, and traditional lending documents.

During law school at the University of St. Thomas, Jill gained valuable experience as an extern with the Office of Ethics & Compliance at Medtronic and as a clerk for a small real estate company and then a Twin Cities firm. She also founded the Real Estate Law Association and participated in the law school's bankruptcy litigation clinic and personal bankruptcy clinic. Jill studied economics, entrepreneurship, and business at the University of Wisconsin-Madison.

For more information, go to Minnesota CLE: 2023 Real Estate Institute.

Michael represents clients in loan workouts, creditor remedies, and bankruptcy; financial services litigation; and real estate litigation. He enjoys tackling highly complex cases that require his zealous advocacy in the courtroom, as well as completing transactional work in partnership with banks and other financial institutions to ensure they accomplish their business goals.

Michael has deep experience guiding workout professionals to implement collections processes and determining how best to enforce their rights as creditors. He also works on the collection of unsecured notes, the enforcement of secured loans, and the acquisition of assets of distressed companies.

For more information or to register, go to Strafford Webinars: "Defending Complex Preference Claims Involving Workouts, Insider Payments, Claim Waivers, Setoff, Critical Vendors."

Amy’s practice focuses primarily on assisting lenders and other commercial creditors, asset purchasers, adversary proceeding defendants, and indenture trustees with creditor rights and bankruptcy issues—sharing vital insight and counsel to companies and individuals in times of tremendous uncertainty and stress. She brings more than two decades of experience as a financial services attorney. As a testament to her accomplishments and expertise, Amy has been recognized as a 2020, 2022, and 2023 Leading U.S. Bankruptcy & Restructuring Lawyer by Lawdragon 500.

For more information, go to TMA Restructuring Boot Camp.

Michael represents clients in loan workouts, creditor remedies, and bankruptcy; financial services litigation; and real estate litigation. He enjoys tackling highly complex cases that require his zealous advocacy in the courtroom, as well as completing transactional work in partnership with banks and other financial institutions to ensure they accomplish their business goals.

Michael has deep experience guiding workout professionals to implement collections processes and determining how best to enforce their rights as creditors. He also works on the collection of unsecured notes, the enforcement of secured loans, and the acquisition of assets of distressed companies.

Amy is a seasoned financial services attorney, distinguished by more than two decades of impactful work, exceptional dedication to her clients, and overall contributions to the industry. Her practice focuses primarily on assisting lenders and other commercial creditors, asset purchasers, adversary proceeding defendants, and indenture trustees with creditor rights and bankruptcy issues—bringing vital insight and counsel to companies and individuals in times of tremendous uncertainty and stress.

To learn more, visit: 2023 Lawdragon 500 Leading U.S. Bankruptcy & Restructuring Lawyers.

The American Bankruptcy Institute is the nation’s largest association of bankruptcy professionals, made up of over 12,000 members in multidisciplinary roles, including attorneys, auctioneers, bankers, judges, lenders, professors, turnaround specialists, accountants, and others. To learn more, go to: American Bankruptcy Institute.

Jason focuses his legal practice on corporate trustee representation, issues relating to corporate trust litigation, and bankruptcy concerns. His varied bankruptcy practice includes representation of both secured and unsecured creditors as well as representation of creditors' committees, in addition to defending financial and banking related litigation. Outside of bankruptcy Jason’s practice includes restructuring of municipal projects, including senior housing, long-term care facilities, and hospitals. Other areas of specialization include commercial financing transactions such as commercial lending and asset-based lending.

Among other significant cases, Jason served as counsel to the indenture trustee for $8.3 billion of bonds issued by the Puerto Rico Electric Power Authority.

For more information or to register, go to MSBA: Current Issues in Crypto

Amy’s practice focuses primarily on assisting lenders and other commercial creditors, asset purchasers, adversary proceeding defendants, and indenture trustees with creditor rights and bankruptcy issues—sharing vital insight and counsel to companies and individuals in times of tremendous uncertainty and stress. She brings more than two decades of experience as a financial services attorney. As a testament to her accomplishments and expertise, Amy has been recognized as a 2020 and 2022 Leading U.S. Bankruptcy & Restructuring Lawyer by Lawdragon 500.

Maslon is one of the eight original members of Meritas, a global alliance of independent law firms established in 1990 by a former Maslon partner.

Amy’s practice focuses primarily on assisting lenders and other commercial creditors, asset purchasers, adversary proceeding defendants, and indenture trustees with creditor rights and bankruptcy issues—sharing vital insight and counsel to companies and individuals in times of tremendous uncertainty and stress. She brings more than two decades of experience as a financial services attorney. As a testament to her accomplishments and expertise, Amy has been recognized as a 2020 and 2022 Leading U.S. Bankruptcy & Restructuring Lawyer by Lawdragon 500.

For more information, go to Ethical Issues in Real Estate-Based Bankruptcies.

Michael represents clients in loan workouts, creditor remedies, and bankruptcy; financial services litigation; and real estate litigation. He enjoys tackling highly complex cases that require his zealous advocacy in the courtroom, as well as completing transactional work in partnership with banks and other financial institutions to ensure they accomplish their business goals.

Michael has deep experience guiding workout professionals to implement collections processes and determining how best to enforce their rights as creditors. He also works on the collection of unsecured notes, the enforcement of secured loans, and the acquisition of assets of distressed companies.

In addition, Michael continues his service on the global trustees board, joining Partner Amy Swedberg, now in her second year of a two-year term. TMA is a professional community that seeks to strengthen the global economy by working to save distressed businesses, assist management to navigate off-plan events, and help healthy companies avoid similar pitfalls.

To learn more, go to: Turnaround Management Association.

Michael represents clients in loan workouts, creditor remedies, and bankruptcy; financial services litigation; and real estate litigation. He enjoys tackling highly complex cases that require his zealous advocacy in the courtroom, as well as completing transactional work in partnership with banks and other financial institutions to ensure they accomplish their business goals.

Michael has deep experience guiding workout professionals to implement collections processes and determining how best to enforce their rights as creditors. He also works on the collection of unsecured notes, the enforcement of secured loans, and the acquisition of assets of distressed companies.

In this vital resource for bankruptcy attorneys, Jason and Amy share their expertise on claims, including types of claims, filing a proof of claim, allowance of claims and objections to claims, post-petition claims, and subordination of claims.

For more information or to order, go to: Minnesota CLE – Bankruptcy Practice in Minnesota Deskbook.

Jason focuses his legal practice on corporate trustee representation, issues relating to corporate trust litigation, and bankruptcy concerns. His varied bankruptcy practice includes representation of both secured and unsecured creditors as well as representation of creditors' committees, in addition to defending preference litigation. Jason's practice also includes commercial financing transactions such as commercial lending and asset-based lending. Prior to joining Maslon, he clerked for the Honorable Robert Littlefield, Jr. at the United States Bankruptcy Court for the Northern District of New York. He has been recognized since 2019 on the Minnesota Rising Stars list as part of the Super Lawyers selection process.

Amy represents lenders and other commercial creditors, asset purchasers, indenture trustees and adversary proceeding defendants with creditor rights and bankruptcy issues. Recognized as a Minnesota Super Lawyer and as a 2020 and 2022 Leading U.S. Bankruptcy & Restructuring Lawyer by Lawdragon 500, she is an experienced litigator in the bankruptcy courts in Minnesota and other jurisdictions. Amy also assists lenders, bankruptcy trustees, and receivers in commercial real estate foreclosures, litigating fraudulent transfer claims, recovering assets, and negotiating workouts. Amy's experience includes the representation of creditors and asset purchasers in major Chapter 11 bankruptcies, including Delta Air Lines, Petters Company, Barney’s, Granite City, Polaroid, and Toys "R" Us.

• Assess the state of the deal by asking the following questions:
• What types of defaults exist (payment, covenants, other liens, taxes)?
• What type of collateral secures the obligation or loan (accounts, inventory, equipment, real estate, improvements, fixtures, developed property, rental property, owner occupied)?
• What is the value of the collateral? How recent is the last valuation? Is there insurance on the collateral?
• What is your lien priority? Consider statutory (superpriority) liens in addition to consensual liens. Are there any competing interests that may have rights to or possession of your collateral (e.g., landlords, warehousemen, consignors, etc.)?
• What is the status of the loan and/or collateral documentation? Has it recently been reviewed for deficiencies, needed updates, continuation of liens?
• Are existing financial covenants properly structured/defined? Are they measuring the correct financial metrics of the borrower?
• What sources of recovery exist other than the collateral, such as a guaranty or co-borrower? Have such entities been recently evaluated in terms of creditworthiness?
• Does the borrower’s business plan make sense, or do they have an alternative plan to alleviate the default?

2. ENGAGE

• Where do you want the deal to go? Lender control over a deal begins with a notice of default and enforcement of remedies. Consider including the following in a default notice:
• Statement of relevant defaults and timeframe to cure such defaults
• Acceleration of debt, if necessary
• Implementation of a default rate, if available
• Advising the borrower of remedies available to lender and potential for lender to recover fees (late fees, court fees, legal fees for collection)
• Request for information needed to assess situation and extent of defaults (updated financial information, information on litigation, etc.)
• Reservation of rights: indicate that lender is not waiving any remedy by simply providing notice of all currently known defaults and that delay in prosecuting other defaults and remedies does not constitute a waiver of either

3. RECORD

• Create a clear document trail with borrower regarding default and workout agreements. A forbearance agreement can be a strong start and should contain at least the following:
• Acknowledgments by borrower (amount of debt; enforceability of security interest; existence of defaults; no defenses, setoffs or counterclaims; lender’s right to enforce; and that documents are still in effect)
• Release of claims against lender and related entities
• Provisions for payments and related deadlines, along with acknowledgment that time is of the essence
• Provisions providing credit enhancements (adding collateral, guarantors, or other signatories)
• Provisions related to additional lender’s rights (access to collateral, inspection of books and records, audits, budgets, etc.)
• Consider charging a forbearance fee or adding new affirmative or negative covenants of the borrower or guarantors that are not in the loan documents
• Termination of forbearance agreement upon forbearance defaults
• Acknowledgment by borrower that they were represented by counsel in negotiation of forbearance and waiver of jury trial

4. REVIEW

• If workout negotiations fail, consider the following other remedies:
• UCC Article 9 public/private foreclosure sale
• UCC Article 9 partial/full satisfaction of debt agreement
• State court receivership/assignment for benefit of creditors (ABC)
• Deed in lieu of foreclosure
• Deed in escrow
• Sale of loan
• Replevin or foreclosure proceedings/self-help repossession
• Composition agreements/contract with creditors to accept pro rata settlement

We Can Help
Maslon’s Financial Services team is prepared to help with any of the foregoing, including initial reviews of loan files for potential pitfalls. Please contact us if you have questions or would like assistance.

For more information or to register, go to: Central States Bankruptcy Workshop.

Amy is a seasoned financial services attorney, distinguished by more than two decades of impactful work, exceptional dedication to her clients, and overall contributions to the industry. Her practice focuses primarily on assisting lenders and other commercial creditors, asset purchasers, adversary proceeding defendants, and indenture trustees with creditor rights and bankruptcy issues—bringing vital insight and counsel to companies and individuals in times of tremendous uncertainty and stress. As a testament to her accomplishments and expertise, Amy has been recognized as a 2020 and 2022 Leading U.S. Bankruptcy & Restructuring Lawyer by Lawdragon 500.

Amy is one of only six attorneys in the Twin Cities who are represented on the list.

Amy is a seasoned financial services attorney, distinguished by more than two decades of impactful work, exceptional dedication to her clients, and overall contributions to the industry. Her practice focuses primarily on assisting lenders and other commercial creditors, asset purchasers, adversary proceeding defendants, and indenture trustees with creditor rights and bankruptcy issues—bringing vital insight and counsel to companies and individuals in times of tremendous uncertainty and stress.

To learn more, visit: 2022 Lawdragon 500 Leading U.S. Bankruptcy & Restructuring Lawyers.

On Friday, Sept. 24, Terry will co-present a session titled "Protecting Intellectual Property and Avoiding IP Missteps in the Era of E-Commerce," which will focus on the electronic aspect of a business as a whole, including: protecting website content and dealing with copyright infringement; understanding intangible value; clauses of necessity in contracts to protect intellectual property; properly using and protecting trademarks; addressing social media concerns, including what happens when influencers use a business's trademarks; and combating patent trolls.

Terry also served on the planning committee for the Institute.

On Thursday, Sept. 23, Jim and Amy will co-present a session titled "For In-House Attorneys Advising on IP Matters – 20 'Crossover' Practice Tips on Antitrust, Privacy, Bankruptcy, and Advertising Law." In the session, Jim will discuss important antitrust issues that intersect with IP matters in-house attorneys may be handling, and Amy will similarly address the intersection of IP matters and bankruptcy issues.

For more information or to register, go to the 2021 Midwest IP Institute.

Terry, a partner in Maslon's Litigation Group, has extensive experience assisting clients with their intellectual property, e-commerce, and complex commercial litigation needs. He has successfully represented clients in state and federal courts throughout the country in a broad range of infringement matters involving patent, trademark, copyright, and trade dress as well as licensing disputes. In addition, Terry has taken intellectual property matters to trial, including federal jury trials in patent infringement, trademark infringement, and false advertising cases under the Lanham Act. His clients include software companies, consumer products companies, e-commerce and emerging technology companies, and medical device companies.

Jim, an attorney in Maslon's Litigation Group, has 35 years' experience trying cases and counseling businesses in the areas of antitrust law, franchise law, and dealer/distribution law. He has successfully represented clients in multiple state and federal courts across the country; responded to state AG, DOJ, and FTC investigations; worked on numerous arbitrations; and argued appeals in the 7th and 8th Circuit appellate courts in addition to several state appellate courts.

Amy is a partner in the Financial Services and Litigation groups. She was recognized as a 2020 Leading U.S. Bankruptcy & Restructuring Lawyer by Lawdragon 500. She represents lenders and other commercial creditors, asset purchasers, indenture trustees and adversary proceeding defendants with creditor rights and bankruptcy issues. Amy is an experienced litigator in the bankruptcy courts in Minnesota and other jurisdictions. She also assists lenders, bankruptcy trustees, and receivers in commercial real estate foreclosures, litigating fraudulent transfer claims, recovering assets, and negotiating workouts.

Recognized as a 2020 Leading U.S. Bankruptcy & Restructuring Lawyer by Lawdragon 500, Amy represents lenders and other commercial creditors, asset purchasers, indenture trustees and adversary proceeding defendants with creditor rights and bankruptcy issues. She is an experienced litigator in the bankruptcy courts in Minnesota and other jurisdictions. Amy also assists lenders, bankruptcy trustees and receivers in commercial real estate foreclosures, litigating fraudulent transfer claims, recovering assets and negotiating workouts.

Amy's experience includes the representation of creditors and asset purchasers in major chapter 11 bankruptcies including Delta Air Lines, Petters Company, Barney's, Granite City, Polaroid, Essar Steel, Gander Mountain, Toys "R" Us, Interstate Bakeries, Premier Entertainment, and United Homes.

Amy, who is recognized as a 2020 Leading U.S. Bankruptcy & Restructuring Lawyer by Lawdragon 500, represents lenders and other commercial creditors, asset purchasers, indenture trustees, and adversary proceeding defendants with creditor rights and bankruptcy issues. She is an experienced litigator in the bankruptcy courts in Minnesota and other jurisdictions. Amy also assists lenders, bankruptcy trustees, and receivers in commercial real estate foreclosures, litigating fraudulent transfer claims, recovering assets, and negotiating workouts. Amy has served on the Board of Directors of TMA Minnesota since 2012.

Her experience includes the representation of creditors and asset purchasers in major chapter 11 bankruptcies including Delta Air Lines, Petters Company, Barney's, Granite City, Polaroid, Essar Steel, Gander Mountain, Toys "R" Us, Interstate Bakeries, Premier Entertainment, and United Homes.

For more information or to register, go to: TMA Minnesota – "A Look at the Hospitality Industry."

Ana represents financial institutions serving as indenture trustees and in other representative capacities in connection with municipal and corporate bonds and mortgage-backed securities. Her practice includes counseling indenture trustees on issues relating to the administration of the trustee’s duties and powers, including after the occurrence of an event of default. Ana also has extensive experience representing indenture trustees in trust instruction proceedings. Prior to joining Maslon, she practiced in the finance and restructuring group of a large law firm.

Brian has extensive experience representing banks, insurance companies, and other capital providers in all forms of commercial financing transactions. These include the areas of general commercial lending and leasing, asset-based lending, mezzanine/second-lien loans, real estate term and construction financing, indenture trustee representation, loan syndications, project finance, and chattel paper warehouse financing. Brian has also served as lead counsel on numerous transactions involving the structuring and documenting of syndicated secured loans, management contracts, and other commercial agreements with Indian tribes located in the United States and Canada.

Amy focuses her legal practice primarily on assisting lenders and other commercial creditors, asset purchasers, and adversary proceeding defendants with creditor rights and bankruptcy issues. She is an experienced litigator in the bankruptcy courts in Minnesota and other jurisdictions. Amy also assists lenders in real estate foreclosures, receiverships, pursuing loan collateral, negotiating workouts, and drafting commercial loan documentation.

Amy's experience includes the representation of creditors in major chapter 11 bankruptcies, including Delta Air Lines, Petters Company, Magnetation LLC, Polaroid, Essar Steel, Gander Mountain, Toys "R" Us, Interstate Bakeries, Premier Entertainment, and United Homes.

To learn more, visit: 2020 Lawdragon 500 Leading U.S. Bankruptcy & Restructuring Lawyers.