Pub. 10 2020 Issue 3

17 PUB. 10 2020 ISSUE 3 Entering Into Pre-Negotiation Agreements Prior to engaging in workout discussions, financial institutions should consider entering into pre-negotiation agreements with borrowers and guarantors in which, among other things, they acknowledge any existing defaults and agree that no oral or written statements will be binding on any party unless a formal written agreement approved by the financial institution is for- mally signed by all parties. It must be clear in that pre-negotia- tion agreement that an exchange of emails is insufficient to bind the lender. Analyzing the Terms of Any Loan Workout Agreement Workout agreements —whether a forbearance, modification, deferral or other similar agreement — create an opportunity for the financial institution to make the best of what might otherwise be an unfortunate situation for all parties. Financial institutions have a vested interest in helping borrowers obtain stability and achieve financial success while protecting the interests of the financial institution. Although there are a plethora of issues to consider and opportunities to achieve these goals, the following are highlighted: 1. Information Gathering. Lenders should use this opportunity to gather as much current data as possible. A field audit of current inventory, accounts receivable, and equipment is prudent to obtain current valuations of collateral and to verify the accuracy of the borrower’s reporting. The information-gathering may also help the financial institution recognize strengths or weaknesses in the borrower’s business, its management team or its industry There are a few scenarios in which an investor seemingly must sell a stock when markets are down because they have no other choice.