Enforcing Equity Pledges on the Brink of Bankruptcy: Evaluating When to Use Board Flips, Sales, Strict Foreclosure

This CLE webinar will examine the trade-offs secured lenders must consider when deciding when and how to enforce their remedies under an equity pledge agreement and how those early choices may later affect their options or generate risks if bankruptcy is filed. The panel will also discuss determining when Chapter 11 is the best option.

One core purpose of an equity pledge is to provide the lender with additional remedies and leverage over the ownership and control of a financially distressed borrower. Each remedy under the equity pledge requires careful evaluation and comes with its own set of imperfect consequences. Whether a lender attempts to exercise proxy rights, effect foreclosure via UCC 9-610, or arrange strict foreclosure under UCC 9-620, it must evaluate which risks are worth taking in light of the perceived benefits.

Much depends on how well crafted the equity pledge agreement is, a complex task requiring knowledge of applicable commercial and corporate law, intercreditor arrangements, the borrower's structure and governing documents, and more. One of the most intensely negotiated issues is how much pre-enforcement notice lenders must provide, which affects what type of remedy might be more beneficial, perhaps weighing speed against the possibility of litigation over avoidable transfers, commercial reasonableness, or lender liability.

Listen as our panel of seasoned restructuring and bankruptcy attorneys discusses the choices that have to be made about timing, sequencing, and other details when lenders have the option of enforcing their remedies under equity pledge agreements.