Arnstein & Lehr LLP recognizes that to successfully navigate the current economic climate, we must draw on resources throughout the Firm that, when employed in a multi-disciplinary fashion, can serve to shield our clients from financial distress. The Commercial Solutions Service Group serves as such a shield for our clients.

Attorneys within this group provide a wealth of services to clients facing either side of a distressed situation. Be it through asset protection, foreclosure and other remedies, restructuring and bankruptcy expertise, labor and employment advice, tax counsel, business transactions or litigation support, the Commercial Solutions Service Group stands ready to advise and protect clients in the real estate, banking, condominium, retail, manufacturing and construction industries.

Our attorneys provide counsel that affords any business facing economic uncertainty an opportunity to make an informed decision as to its most strategically viable and economically feasible course of action. This includes assisting clients in determining the best tactical use of their assets to maximize that asset’s value. Assets such as real estate, partnership or stock interests, business equipment, inventories or intellectual property may have been pledged as collateral for loans that are now in default, or may represent the last lifeline for a failing business. The proper handling of employees, contractors and other is also a must. We have counseled clients on either side of the table in such situations, and stand ready to offer our solutions effectively and efficiently as such circumstances arise.

We have encountered scenarios such as these in our three Illinois offices as well as in our five Florida offices:

Scenario 1: The Collapse of a Home Builder
A suburban homebuilder has seen sales activity plummet as a result of the economic crisis. Construction at a number of subdivisions has halted. Tradesmen are getting anxious because they haven’t been paid. The municipality has issued bonds for infrastructure improvements and the potential tax revenue to service those bonds is disappearing in the absence of home sales. Home buyers are facing empty, half built houses where they thought they were going to have a neighborhood. The lender has seen the value of its collateral collapse. In the absence of a viable exit strategy, the lender does not even know whether it should foreclose.

As in the remaining scenarios we will outline here, we have represented each and every one of the constituents in variations of this scenario.  Our experience includes:

• Advising lenders with respect to workouts and restructurings outside of bankruptcy.
• Counseling debtor entities as to alternatives and working with their creditors to implement successful exit strategies.
• Working with municipalities to enforce their rights under redevelopment agreements.
• Helping trade contractors leverage their lien rights into a vehicle for payment
• Implementing foreclosure strategies in real estate including receiverships, liquidating trusts, etc.

Scenario 2: Failed Condominium Conversion
A condominium conversion loses sales momentum halfway through the project. Half the units are occupied, but the association now faces a half empty building. The developer is out of funds; its lender is considering foreclosing on the unsold units and selling them to a group specializing in rentals. The unit owners bought near the top of the market, and they can only resell their units at a loss. Instead of a building full of owner/occupants, the association is now facing a building full of tenants and inadequate cash flow.

Sadly, this scenario has occurred time and again during the past year, but the members of our Commercial Solutions Service Group have given needed assistance by:

• Advising condominium associations of their rights and creating strategies to protect homeowners’ interests.
• Identifying potential sources of capital or alternative financing to carry the project through a difficult stretch.
• Helping a lender make wise decisions in a potentially explosive situation

Scenario 3: Another Rust Belt Tragedy
A third generation family-owned manufacturing business has been buffeted by foreign competition, energy costs and a contracting credit market. Its secured lender is reviewing its options – none of them good. Does it foreclose on the assets? Does it try to find a buyer for a failing business? Can it convince the owners to liquidate and stop the bleeding? The family business owners likewise are concerned. Was their historic estate planning adequate to shield their personal wealth or is it at risk? What are the tax consequences of their exit strategies? Are pension funds fully funded or will their termination result in exposure? Can the plant be closed suddenly without violating state and federal labor laws? The trade creditors are stretched, making them restless. The real estate, which is also mortgaged to the lender, is ripe with three generations of environmental issues.

We have the expertise to represent each of the parties in this scenario, from the lender, to the business and its owners, to the trade creditors. We can help in the following ways:

• Representing secured creditors in bankruptcy court proceedings, as well as in pre-petition negotiations leading to a structured filing, or in alternatives to bankruptcy geared toward maximizing recoveries from pledged collateral.
• Implementing UCC Sale strategies to foreclose on personal property pledged as collateral.
• Counseling debtor companies as to the most suitable alternatives for winding down their business – be it an out of court liquidation through an assignment for the benefit of creditors, a bankruptcy filing or the sale of the valuable assets remaining through a fair process designed to maximize value.
• Representing challenged businesses as they navigate the regulatory minefields (ERISA, environmental, labor) that aggravate an already troubled situation.
• Advising the owners of those businesses as to their personal financial exposure resulting from business failure.
• Representing creditors committees so trade creditors can obtain recoveries in what may seem to be hopeless situations

Scenario 4: The Mortgage Meltdown in Action
A community bank has originated dozens of loans through a network of brokers who have delivered highly leveraged mortgages. The brokers’ practices might have crossed the line. The loans were packaged and sold into the market. Now they have an extraordinarily high default rate, prompting the loan servicer to investigate the underwriting practices. A number of loans are tendered back to the community bank for repurchase, jeopardizing that bank’s capital structure. To make matters worse, the mortgage borrowers are refusing to pay on their mortgages, asserting consumer finance violations. A class action lawsuit is on the horizon.

We have assisted parties in such dilemmas by providing counseling in the following respects:

• Analysis of repurchase contract obligations and loan participation agreement obligations.
• Defense and enforcement of repurchase obligations and loan participation agreement obligations.
• Defending class actions and other cases alleging violation of Federal consumer finance laws and related state consumer fraud act claims.
• Negotiating and drafting loan participation agreements.
• Implementing investigations geared toward uncovering fraud and white collar crime.

The Commercial Solutions Service Group guards those corporations facing the challenge of doing business in these crisis-ridden times. Its business oriented problem solvers stand ready to protect your interests from any position that those interests are attacked. To do so, we draw from any number of sources of expertise residing in our Firm:

• Real estate attorneys are available to structure and close a transaction under exigent circumstances.
• Mergers and acquisition attorneys are in a position to conduct due diligence rapidly, structure a deal and, as the case may be, sell or buy a distressed company for an opportunistic buyer.
• Financial services attorneys can negotiate and draft forbearance agreements so that lenders and borrowers can gain some time and breathing room to implement a turnaround strategy.
• Environmental attorneys can assist businesses in distress when faced with environmental issues during real estate sales or acquisitions.
• Our Tax Group can structure tax advantaged transactions, counsel as to sources of exposure, and represent taxpayers in IRS enforcement proceedings.
• Our municipal counsel regularly advises clients in areas relating to redevelopment, annexation, planning, approvals, zoning, subdivision, and condemnation.
• And, our litigation support services – a practice group that has been protecting our clients’ interests throughout our Firms’ 115 year existence – provides unrivaled skill, strategy and success for our clients in federal and state courts, not just in Illinois and Florida, but throughout the country, at both the trial and appellate levels.