During an interview with Bloomberg TV on March 6th,
Lawrence Summers, former Secretary of the U.S. Treasury, observed:
"Economic time has stopped but financial time has not
stopped." An incisive summary as any of the current
predicament facing debtors and creditors. Strapped for cash and
finding themselves in loan default, many borrowers are asking their
lenders to forbear, or extend further credit, and often both.
Lenders want to do the right thing, while maintaining flexibility
and insulating themselves from further risk. What to do?
In the context of working out distressed loans, lenders may
become more involved in the business operations of their borrowers.
A lender's agreement to forbear from exercising remedies will
require the borrower to meet operational and transactional
milestones. As lenders mull restructuring proposals and decide
whether to act (or refrain from acting), they should be mindful of
potential lender liability. Lender liability refers to a
