Document Type

Article

Publication Date

2012

Abstract

The author of this article discusses two recent cases which deal with unconditional liability on nonrecourse carveouts and spring-ing guaranties. One potential consequence of these decisions: by essentially converting these contingent guaranties to unconditional guaranties, the threat of springing liability disappears and the guaranties cease to have deterrent effects. If the guarantor is li-able whether or not the single purpose entity files for bankruptcy, why not file? The result is likely to be bankruptcy filings and other "misbehavior" by borrowers. Moreover, the analysis used in these cases would put many performing loans into default along with triggering recourse, threatening substantial harm to borrowers and lenders alike.

Download

Share

COinS