FLB Law Closes $8 Million Loan for Fairfield County Bank during the Last Two and Half Weeks of August
SITUATION
FLB Law’s Real Estate & Land Use Practice represented Fairfield County Bank in this loan that would have to close in less than a month when the typical turnaround for closing a commercial loan of this nature is about six weeks.
The borrower owns a 27,000-square-foot retail building in Connecticut, that is home to a national retail anchor tenant, as well as a smaller, local retailer. The company sought to refinance the property at a lower interest rate with an $8 million loan from Fairfield County Bank. The borrower had to close on the loan to pay off its existing mortgage by September 1, 2022, or incur high penalties.
CHALLENGES
While this closing posed numerous challenges, FLB Law was up for the task. Having extensive experience handling corporate transactions helped the attorneys navigate the landmines they encountered.
The first challenge was the timing of it. The commitment letter from the bank with the terms of the loan was sent to the borrower on August 4, 2022, and the loan had to close prior to September 1, 2022. Unfortunately, August is a notoriously difficult month for coordinating closings due to many necessary parties being on vacation. That was especially true in this case, with the borrower’s counsel having a pre-planned vacation for the final week of August, and the borrower was out of state.
Second, in reviewing the leases, FLB Law discovered that one of the leases did not automatically subordinate to the new mortgage, which required us to get fully executed subordination, non-disturbance and attornment (SNDA) agreements prior to closing. As a result, FLB Law had to obtain signed documents from the tenants stating that the new loan would be in the first lien position and that the lease would be subordinate. The time it normally takes to obtain these signatures could have significantly hindered our ability to close the loan on time, especially when dealing with a large national retail tenant.
Third, the borrower’s corporate books lacked the clarity we desire when working on a loan, especially one that requires expediting. As a result, FLB Law undertook an extensive review of the borrower’s corporate structure. We discovered that it was owned by various trusts, necessitating the bank to revise its commitment letter to include more protective collateral in the event of default. Specifically, it required making the president of the borrowing entity’s wife the guarantor of the loan in the event of her husband’s death, as she was the beneficiary of a trust account that Fairfield County Bank required the borrower to maintain in the event of a default.
SOLUTION
Experienced with loan closings and with corporate transactions, FLB Law Partner Rick Costantini started chipping away at the speedbumps. He was able to quickly get the necessary documentation from the national retail tenant while also reworking on revising the commitment letter.
Rick worked diligently during the last 2 ½ weeks of August, tracking down people on vacation and finding others with the ability to execute tasks necessary to close the loan by the month-end deadline. As a result, FLB Law closed the deal in just about three weeks. The borrower got his $8 million loan without incurring any penalties, and Fairfield County Bank was protected with the correct language and documentation.
Rick worked diligently during the last 2 ½ weeks of August, tracking down people on vacation or finding others with the ability to execute tasks necessary to close the loan by the month-end deadline. FLB Law closed the deal in just about three weeks. The borrower got his $8 million loan without incurring any penalties, and Fairfield County Bank was protected with the correct language and documentation.