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Questions for Borrowers and Lenders Amid Coronavirus Outbreak

Firm Memoranda

As borrowers and lenders grapple with a new economic landscape in the wake of COVID-19, borrowers are faced with the need to secure sufficient liquidity in the event of an extended recession that could have long-term effects on credit markets. To that end, companies may try to draw on all credit lines currently available to them (including outstanding revolvers). At the same time, lenders may be hesitant to extend credit in a market where there is substantial uncertainty about their ability to be repaid. The operative provisions of each borrower’s loan agreements will be key to determining if and to what extent lenders must provide additional credit. The same provisions may also have other significant consequences for borrowers and lenders, such as determining whether the change in economic circumstances can be a basis for claiming loan breaches and the acceleration of debt. This article outlines important considerations for borrowers and lenders in determining the availability of credit, the risks associated with breaching existing funding agreements, and some of the potential defenses available in these circumstances.

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John Quinn
johnquinn@quinnemanuel.com
Phone: +1 213-443-3200

Karl Stern
karlstern@quinnemanuel.com
Phone: +1 713-221-7171

Jonathan Bunge
jonathanbunge@quinnemanuel.com
Phone: +1 312-705-7476

Christopher Tayback
christayback@quinnemanuel.com
Phone: +1 213-443-3170

Michael Lyle
mikelyle@quinnemanuel.com
Phone: +1 202-538-8166

Andrew Rossman
andrewrossman@quinnemanuel.com
Phone: +1 212-849-7282

Molly Stephens
mollystephens@quinnemanuel.com
Phone: +1 213-443-3635

Christopher Kercher
christopherkercher@quinnemanuel.com
Phone: +1 212-849-7263

Silpa Maruri
silpamaruri@quinnemanuel.com
Phone: +1 212-849-7211

Anil Makhijani
anilmakhijani@quinnemanuel.com
Phone: +1 212 849 7334

Jordan Harap
jordanharap@quinnemanuel.com
Phone: +1 212-849-7013

Caroline Voldstad
carolinevoldstad@quinnemanuel.com
Phone: +1 212-849-7164