Before you agree to a workout remember that the Borrower has already promised to repay. A new promise alone is not sufficient, always look to improve the likelihood of recovery
Move decisively to take security from all counterparties/credit bases to cover loss under all possible scenarios. Condition your agreement to the workout on the receipt of additional collateral if available
Ensure that security is provided, documented and perfected within the minimum time possible
Do not exchange your cash today solely for the client’s promise of future action
Be reasonable in what you require the Borrower to do but limit the options and require swift responses/action
Do not allow guarantors to enjoy a lavish lifestyle whilst you are relying on them to make good a loss
Workouts have the ultimate aim of reducing bank debt not increasing it
Do not provide equity (however it is described!) without a degree of ownership/control
Seek to avoid “lender liability” issues or counterclaims from the client
Lend “good” money into a “bad” situation only as a last resort. Reasons for doing so might be:a. To get an interest in additional collateral. Ensure that the collateral is really worth more than the additional funds advancedb. To avoid/defer a bankruptcy. This may be necessary to ensure that the Bank’s position is protected against the claims of other creditorsc. To maintain the value of existing securityd. There is a clearly identifiable source of repayment over which the Bank has prioritye. Any other decision to advance must be based on the future viability of the client and the ability of the client to “solve the problem”
