Security review

Security review

Security reviews—when and why?

Often the first step in a restructuring is for the lender to ask its legal advisors to conduct a full review of the loan and security documents relating to a particular borrower. This review is likely to be triggered by:

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signs of distress by the borrowing group, for example actual or anticipated financial covenant or payment defaults under the finance documents, or
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internal transfer of a distressed borrowing relationship into a special situations, restructuring or business support group within a financial institution. In such a situation, internal process may require that a security review is carried out as the first step after transfer so that the new relationship managers can familiarise themselves with the asset and determine a strategy for dealing with it through any periods of financial difficulty

The purpose of a security review is to enable a lender to:

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gain an understanding of the borrower's security and guarantee structure
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ensure that the security has been properly drafted and perfected, and is valid and enforceable
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understand its enforcement options, and
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find out whether there is anything that

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