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Abstract: 

As a result of dramatic changes to the lending market in recent years, lenders have become increasingly mindful about the pitfalls associated with certain types of loans and loan structures and, in response to changes in our economic landscape, have required added security to backstop loan transactions. It is reassuring that lenders now—as a matter of course—include protective measures, such as inter-corporate guaranties, in their various credit approval processes. But it is equally important that lenders take the extra step of structuring such protective measures in a manner that will withstand future challenges by the underlying obligors. Such challenges have been especially prevalent in the context of upstream and cross-stream guaranties. This article explains the nature of potential problems with upstream and cross-stream guaranties, and then presents practical steps lenders can take to avoid them.

Keywords: fraudulent conveyance; lack of consideration; upstream guaranty; Bankruptcy Code Sec. 548; insolvency; after-acquired guaranties

Affiliations:  1: Horwood Marcus & Berk Chartered; 2: Horwood Marcus & Berk Chartered.