‘All the dominoes fall’: Business debts are threatening a cascade of loss

Joshua M. Bowman, chair of the firm’s Hospitality Practice Group, was quoted in the Boston Business Journal on April 10, 2020. The article, “’All the dominoes fall’: Business debts are threatening a cascade of loss,” depicts the range in how commercial landlords and tenants are handling rent payments during the COVID-19 pandemic. For instance, some tenants are being offered 50% off on rent for the next three months, others are receiving a full deferral, and some will be required to pay what they’ve being forgiven of now at the end of their lease term.

Read the full article in the Boston Business Journal (subscriber content).

From the article:

“’The word of the day when it comes to debt is ‘forbearance,” said Josh Bowman, an attorney who chairs the hospitality group at law firm Sherin and Lodgen LLP in Boston. ‘A lot of landlords have already gone to their lenders, and a lot of their lenders have already proactively sought out their borrowers, and they’ve already started to modify loan terms so landlords don’t have to pay their debt in April. It’s all a big, connected chain.’

There are typically two types of lenders, Bowman says: a balance sheet lender, which holds a loan on its own balance sheet and doesn’t sell to anyone else, and a commercial mortgage-backed securities lender, which sells a loan to a trust owned by bond holders and Wall Street investors.

…’If you have a CMBS loan, there are no workouts going on yet,’ Bowman said. ‘It takes much longer for a CMBS lender to get into a workout, because they have to first refer the loan to a special servicer. The master servicer — which is the person who normally just collects the money on the loan — has no power to do any kind of workout.’”