Key Points:
Lenders and customers should not enter into a
forbearance arrangement without properly understanding its terms
and risks, and any conditions imposed on the customer must be
clear, realistic and achievable within the specified
timeframe.
The vast majority of risk inherent in a forbearance arrangement
can be managed through careful and strategic planning at the
outset. By and large, the benefits to both the lender and customer
in reaching a consensual arrangement can significantly outweigh the
alternative outcomes of continued uncertainty for the parties or
enforcement by the lender under the more traditional and formal
insolvency appointments in Australia.
Both parties should be aware of the potential risks of making,
or accepting, a forbearance request. Though often manageable
through proper documentation and implementation, our experience
suggests that a forbearance can often involve increased lending,
extension of maturity dates, interest holidays
