What can be done if a borrower breaches or violates, or if borrower forecasts a future breach or violation, of a representation, warranty, or covenant in an existing credit agreement?
Borrowers should be proactive in light of the COVID-19 crisis. Depending on the circumstances, borrowers may need to request that their lenders enter into amendments to accommodate significant changes in the borrower’s business and the borrower’s ability to meet its obligations under the loan documents. These amendments may be short-term or medium-term, or in some instances permanent, modifications depending upon the nature of the covenants and the potential impact of COVID-19 on the borrower’s business.
Borrowers may also request that the lender issue a waiver letter concerning the specific default or breach, or any forecasted default or breach. If necessary, a forbearance agreement may be needed to give the borrower’s business sufficient time to recover from the COVID-19 crisis. Borrowers should consult with legal counsel when negotiating and documenting any amendments, waivers, forbearance agreements, and other loan modifications.
Last updated March 16
These materials are made available by Jackson Walker for informational purposes only, do not constitute legal or medical advice, and are not a substitute for legal advice from qualified counsel. The laws of other states and nations may be entirely different from what is described. Your use of these materials does not create an attorney-client relationship between you and Jackson Walker. The facts and results of each case will vary, and no particular result can be guaranteed.