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ARTICLE · 21 JULY 2015

LIHTC Exit Strategies: Right-Sizing The Loan

Thompson Coburn LLP
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This post is part of a continuing series on the Credit Report Blog on the subject of workouts and bankruptcies involving low-income housing tax credit (LIHTC) projects.

United StatesInsolvency/Bankruptcy/Re-Structuring
Mark Bossi
Mark Bossi
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Note: This post is part of a continuing series on the Credit Report Blog on the subject of workouts and bankruptcies involving low-income housing tax credit (LIHTC) projects.

The most logical long-term solution for a distressed and over-leveraged LIHTC project is a negotiated re-structuring or "right-sizing" of the debt owed to the lender. Such a right-sizing may be accomplished by a repayment of debt by the borrower and investors, a forgiveness of debt by the lender or a combination of both. While in theory this is the most logical solution, just like any settlement, it depends upon the parties' assessments of their respective alternatives and their leverage for negotiating a deal that they believe is acceptable.

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