Receivership: Seizing Cash on Day One
While there are many advantages in appointing a receiver rather than going directly to foreclosure, there is one crucial benefit to consider: the Receiver can seize much needed cash on day one.
During the receivership takeover process, bank accounts are seized as a part of the asset. Borrowers typically stop making payments on their loans but continue to operate their businesses, taking in rents and other income. The amounts vary, but in Trigild’s experience, our bank seizures have been as high as $500,000.
Time is not your friend. The key is to get the receiver in as quickly as possible to prevent disappearing funds by the debtor. A savvy receiver uses a combination of account freezes, careful negotiation and other tactics to quickly gain control of those bank accounts — protecting the cash for the receivership entity.
Why is this beneficial? In a bankruptcy those funds would be distributed to any number of creditors. But, under a receiver, the funds can be used to defray a number of costs associated with the asset – such as deferred maintenance and other operating expenses – or even to cover expenses associated with the receivership itself. Since the receiver is not responsible for past debt and the funds go to maintaining/operating the property, a more favorable recovery is achieved for the lender.
Here are just a few examples of receiverships Trigild has undertaken, with sizable cash seizures:
$ 456,000.00 Office/Industrial complex in California
$ 164,000.00 Office Building in California
$ 92,000.00 Industrial/Office in Maryland
$ 368,000.00 Retail in Kentucky
$ 84,000.00 Multi-state Industrial Portfolio
$ 172,000.00 Retail in Arizona
$ 292,000.00 Retail in Nevada
$ 84,000.00 Multi-state industrial complex
$ 55,000.00 Retail in Indiana
$ 50,000.00 Office complex in California
$ 60,000.00 Hotel in California
$ 275,000.00 Resort in Utah
$ 371,000.00 Apartment Building in Michigan