Practice Areas & Industries: Manatt, Phelps & Phillips, LLP

Practice/Industry Group Overview

Distressed Asset

• Distressed asset and loan portfolio sellers for deal structuring and sale strategy, seller due diligence and organization, market evaluation, deal negotiation, and closing and post-closing matters, including litigation by borrowers and co-lenders.
• Distressed asset and loan portfolio buyers in risk analysis and due diligence, including land use and entitlement due diligence; asset-level business planning, contract negotiation, closing and conveyancing; and post-closing matters, including asset management, restructurings and/or enforcement.
• Financial institutions in restructurings of mezzanine and senior debt facilities and equity investments.
• Lenders and borrowers in workouts and restructurings of loans (both portfolio and securitized loans), including loan modifications, loan forbearance agreements, deeds-in-lieu of foreclosure, discounted payoffs and other strategies.
• Creditors in foreclosures, deeds-in-lieu transactions, bankruptcies, creditors’ rights proceedings, and lender liability defense, as well as all aspects of real property litigation, including mechanic’s lien and stop notice litigation, claims against title insurers and other litigation.
• Owners and operators of real estate assets in restructurings of equity, partnership restructurings and ground lease workouts.
• Financial institutions in loan portfolio purchases and sales and related governance matters, such as compliance with FDIC audit and reporting requirements.

• A major investment bank in its acquisition of mortgage loans and REO properties valued at several billion dollars and located around the world. Our team evaluated over 300 loan and REO assets – more than 500 properties in just four weeks – handling title, documentation, bankruptcy, transfer restrictions and other matters. Contract negotiations were handled simultaneously with the conduct of due diligence, and the conveyancing required the negotiation and execution of thousands of closing documents. The entire transaction was successfully concluded in only four months.
• A regional bank in the sale of a portfolio of 16 nonperforming loans secured by residential real estate properties located in California and other Western states. The sale was conducted though an auction involving a limited number of prequalified buyers, and the net price to the selling institution turned out to be something of a high-water mark (subsequent portfolio sales having sold at much greater discounts).
• A real estate investor in the acquisition of a note secured by a lien on a high-rise residential condominium subject to a commercial condominium regime. We then represented our client in foreclosing on the underlying real property collateral, including mounting a successful defense against lender liability claims asserted by the borrower’s principal.
• A hedge fund in a bid for the assets of a failed financial institution that was being marketed by the FDIC via an online auction.
• A regional bank in designing and offering to its borrowers a structured program of discounted payoffs and loan purchases for performing and nonperforming loans. We prepared prenegotiation and confidentiality agreements, offer letters and DPO and LPA agreements, and acted as the bank’s primary borrower contact point to negotiate and close each individual transaction. We have closed over 25 transactions under this program.
• A real estate developer in the acquisition of a note secured by a lien on a retail development site. We then represented our client in foreclosing on the underlying real property collateral and defending against claims asserted by the borrower’s principal.

• Lowe Enterprises and its affiliates in the restructuring of $330 million in debt secured by the Terranea Resort, a 580-room condominium hotel resort on the Southern California coastline. We had previously represented Lowe as developer in obtaining a construction loan from the now-defunct Corus Bank. Corus was on the FDIC watch list for 13 months before the agency seized its assets. We worked with the FDIC to extend and modify the construction loan, and, after the agency sold the Corus assets to an investor group led by Starwood Capital, we worked with Starwood to restructure the outstanding construction loan and a mezzanine loan.
• GMAC ResCap in the workout of troubled assets in its loan and REO portfolios, including the disposition of numerous properties and the sale of loans, many of which are secured by real estate assets located in a number of Western states or are part of a master loan facility covering multiple projects in various stages of development. This work requires taking a multidisciplinary approach and we have involved Manatt’s real estate, land use, and workout and bankruptcy attorneys.
• A shopping center developer in the restructuring of a regional mall project in California’s Central Valley. This included the renegotiation of ground leases, securitized debt contracts and partnership agreements.
• The sponsor in the dissolution of a multifamily real estate investment company. This required creating an exit strategy for the individual principals that included their complete release from any and all liabilities and the receipt of a separation payment, and involved extensive negotiations with secured debt holders and equity investors.
• U.S. Bank in restructuring a land development loan secured by residential lots and a golf course in Arizona. Our client was part of a syndicate of lenders holding notes totaling $90 million. As part of the restructuring, personal guarantees were released for new consideration and a general release of the syndicate lenders was obtained, and the original notes were sold back to the borrower at a discount following a recapitalization of the borrowing entity using an outside investor.
• Several pension fund advisors in the acquisition of “broken” or “fractured” condominium deals, involving complex due diligence, clearance of mechanics liens and other clouds on title, and resolution of bankruptcy and other issues arising out of the insolvency of the project’s original developers.

• A financial institution as defendant in a breach of contract action in connection with the proposed sale of a nonperforming loan. We reached a favorable settlement before trial in which our client paid no damages.
• A financial institution in connection with a post-closing lender liability claim against the current owner of a portfolio of loans and our client, the portfolio’s original owner.
• A financial institution in an action arising from a failed residential development project in Southern California. The case presented a number of complex issues relating to whether the bank perfected its security interest in all the intended loan collateral (judgment against borrower obtained and placement of all collateral security under the control of the bank or its designee pending); mechanic’s lien, stop notice and other third-party claims against the project and/or bank (all successfully resolved); the appointment of a receiver to control and stabilize the project (receiver in place); claims against bonding companies regarding the completion of infrastructure improvements (settlement negotiations under way); and claims by the bank against its title insurer (scheduled trial date approaching).

Services Available

Representative Matters

Several representative examples illustrate the full-service capabilities and creativity that Manatt lawyers can bring to even the most complex portfolio transactions.

• A regional bank asked us to assist in the sale of a portfolio of construction loans (consisting of both whole loans and syndicated loans) and REO.  The assets were principally secured by residential subdivision property.  Our team conducted the sale in a little over nine weeks, including asset-level due diligence and file preparation, contract drafting and negotiation, contract period servicing, and conveyancing.  This transaction represents one of the first significant mortgage loan portfolios sold during the current market cycle.
• Representation of a major investment bank in its acquisition of mortgage loans and REO valued at several billion dollars and located throughout the United States, England, the Caribbean and Mexico.  Our team evaluated over 300 loan and REO assets involving more than 500 properties in just four weeks, handling title, documentation, bankruptcy, transfer restrictions and other matters.  Contract negotiations were handled simultaneously with due diligence, and the conveyancing was completed with the negotiation and execution of thousands of closing documents.  The entire transaction was successfully concluded in four months.
• A global commercial bank asked us to assist in the disposition of well over 200 assets valued in excess of $600 million.  In addition to conducting the seller’s due diligence and documenting and closing the transaction, we worked closely with the client to develop a creative disposition strategy for the portfolio – one that a trade periodical later characterized as “pushing the envelope” from the seller’s perspective.
• The U.S. arm of a global banking conglomerate retained us to sell a distressed loan and REO portfolio, but was constrained by certain loss recognition restrictions.  Until the portfolio was marketed and bids were received, however, the purchase price and the amount of the loss generated by the sale could not be known – which posed a difficult challenge in sizing the portfolio for sale.  To address this issue the project team devised a two-tranche disposition strategy modeled after the “greenshoe” registrations used in securities offerings.  The first sale was sized to fall within acceptable loss limits based on projected sales prices.  Prospective bidders were advised that the successful bidder on the first tranche would be offered an option to purchase a second tranche, with composition and price set by the bank after the winning bid was identified.  The first sale closed on schedule, thanks in large part to the project team’s efficient, yet comprehensive, due diligence effort.  The winning bid was the highest of several that offered a premium in order to acquire the second tranche, and the successful bidder did in fact exercise its option.
• Recently, a well-known owner of commercial properties sought our assistance in determining whether it was possible to workout a troubled loan that had been included in a CMBS transaction.  Our securitization and real estate lawyers were able to track down the pool into which the loans had been securitized, analyze the loan documents, the complex REMIC tax rules and the pooling and servicing agreement provisions governing the powers of the loan servicers, and provide the client with several alternative strategies for working out the troubled loan.
• Representation of major Wall Street institutional lender in Chapter 11 proceeding of high profile luxury residential golf course development in Southern California;
• Representation of major international bank in Chapter 11 proceedings as well as out of court restructurings of significant Hawaiian resort and residential developments; and
• Representation of several major opportunity funds in workouts and bankruptcies (including Chapter 11 proceedings) of numerous complex real estate assets.
• Representation of a major money center bank in its restructuring of a $95 million construction loan secured by a San Francisco apartment project.  The loan was first restructured, and $40 million of subordinate debt was issued to fund cost overruns.  Then, a Chapter 11 case ensued, wherein the debtor’s “cramdown” plan was defeated and relief from stay to permit foreclosure was obtained;
• Representation of a title claimant to real estate in the Chapter 11 of an entity owning land in Century City, California that ultimately sold for over $110,000,000, the highest price per square foot ever paid for land in Los Angeles; and
• Representation of the secured bondholders in a workout/foreclosure on membership interests in limited liability companies that owned one of the largest real estate development projects in Los Angeles.
• Representation of a California-based bank in the sale of a mixed portfolio of loans through an internet marketing program.
• Representation of a New York-based private equity investor in making a bid on a portfolio of assets of a failed banking institution being marketed by the FDIC.

Clients:
Bank of the West , Central Pacific Bank, Citigroup, GMAC ResCap, Lowe Enterprises, UBS , U.S. Bank, York Capital