Maturity of Commercial Debt a Growing Concern with Large Banks, Says Covendium

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Covendium, a commercial recapitalization specialist, has recently noticed signs that big banks are preparing for an upcoming surge in commercial debt refinancing.

commercial debt restructuring

Covendium says big banks are restructuring to prepare for an upcoming influx of maturities on commercial debt.

While all of the media is focused on the consumer mortgage crisis, banks are very conscious of the $1.4 trillion of commercial debt that is coming to maturity over the next few years.

With the news last week that the Goldman Sachs-Whitehall Real Estate Fund restructured $1.42 billion of debt on one of its largest hotel portfolios; the market was provided more information on a potential commercial loan maturity crisis. The restructuring of the fund is a sign that large banks are making efforts to get ahead of the upcoming wave of commercial debt maturities that are coming due in the next few years, says leading commercial debt restructuring firm Covendium LLC.

As a result of the refinancing, Goldman was able to avert over $650M of debt maturity in early 2012 and restructure the debt to match the underlying collateral of the hotel properties in a portfolio assembled over 2006 and 2007. “The big banks are getting an early start on restructurings ahead of the maturity witching hour,” says Gregg Grauer, Chief Executive Officer of Covendium LLC, the nation’s largest debtor-side commercial debt restructuring and advocacy firm. “While all of the media is focused on the consumer mortgage crisis, banks are very conscious of the $1.4 trillion of commercial debt that is coming to maturity over the next few years,” adds Grauer.

During the commercial real estate boom in the first half of the last decade, investors and lenders made big bets on new projects at values significantly higher than the current market, with maturities that are quickly coming due.

“Lenders can no longer delay the inevitable,” says John Hyltin, Managing Director of Resolutions for Covendium. “Every lender that I speak to is acutely aware of the size and maturity of their portfolio, and overwhelmed with the number of distressed loans they need to manage. If the debtor is reasonable and advised by an experienced firm like Covendium, there has never been a better time to realign debt with the underlying collateral,” advises Hyltin.

“We are seeing signs that cheaper capital from banks, insurance companies and even securitizations are slowly coming back to the market—but the quality of the collateral and the economic terms of each deal matters now more than ever,” says Grauer. “If Goldman Sachs gets a jump on debt restructuring for their own portfolio, it’s a pretty strong sign that other debtors who do not have access to the information and resources of a Goldman-Sachs should get a move on.”

For more information about how Covendium can help commercial debtors negotiate with their lenders, or any of Covendium’s products or services, call them at (407) 284-4000, or view them on the web at http://www.covendium.com.

About Covendium
Covendium specializes in comprehensive commercial debt resolution and restructuring for clients whose financial model has been destroyed by debt service payments that have become unsustainable.

For some clients, all they need is an experienced negotiator to provide their lender with the reality of the financial situation and the tool-set to restructure their obligations. For other clients, Covendium may assist in the replacement of the debt from a bank to a private funding source.
Their team of professional advisors has successfully restructured billions in transactions, with dozens of banking institutions (including major national, regional and community banks) and over 30 separate non-bank financial counterparties.

Bad things happen to good people. Covendium is a premier national debt resolution firm that helps their clients with everything from commercial foreclosure in Charlotte to recapitalization in Miami to unpaid principal balance in Phoenix to discounted pay off in Chicago.

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Jonathan Gorman
Covendium
(407) 284-4380
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