internally by the lender, using third-party software, and other documents have been prepared by outside counsel or where certain existing loan documents are to be crossdefaulted and/or cross-collateralized with new loans to the same borrowing group. Often, a lender will start with internally prepared documents and engage outside counsel as the facilities increase in size or otherwise become more complex due to cross-collateral or other issues. This creates a few challenges. Fundamentally, it can be difficult to understand the overall structure, outstanding credit exposure and collateral. A significant amount of time may be required to review the existing paperwork in order to determine the current status and to work through any modifications that may be necessary. For example, a mortgage may have been recorded in connection with a term loan from 2000. The intent of the lender was for that same mortgage to secure a new credit facility to the same borrowing group in 2020 under a dragnet clause. However, that mortgage specified a 2015 maturity date for the secured debt and was not modified in connection with the 2020 credit extension. Second, there will likely be inconsistencies between internally and externally prepared documents. While third-party loan document software serves a purpose, it is pretty inflexible. There is limited ability to build out covenants and related definitions within a software-prepared document set. Thus, there may be a situation where there are ambiguities or inconsistencies among loan documents, differing default triggers or related issues, all of which can create difficulties in the administration of the credit facilities. Given the foregoing, in these situations, I always try to roll all outstanding loans under a common loan agreement when possible to ensure consistency and make the loan document set more cohesive. I also explicitly modify or ratify mortgages, other collateral documents and guaranties whenever additional secured loans or modifications to existing facilities are made in order to eliminate any potential ambiguities. I recognize that many of the above points may be obvious; however, sometimes, the simplest of steps are the easiest to overlook. Ultimately, as lender’s counsel, our goal is to provide a smooth closing process, which helps you solidify the relationship with your borrower client. Hopefully, this article serves as a helpful reminder for your next loan transaction. Aaron B. Johnson has a broad-based transactional practice, focusing on commercial lending, real estate, corporate finance and general business matters. Aaron regularly represents lenders and borrowers in various types of financing transactions, including acquisition and construction financing, asset-based lending, syndicated credit facilities, tax credits and working capital lines of credit. He has experience in all aspects of commercial real estate development, including land acquisition and disposition, negotiation of design and construction documents, tax increment financing and leasing and related matters. Aaron also routinely advises clients in a variety of industries on mergers and acquisitions, corporate governance, debt and equity financing and general commercial matters. 15 Nebraska Banker
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