As the impact of the Covid 19 pandemic on lenders and borrowers develops over time, we know here that lenders and borrowers will often and widely communicate about possible credit changes and other accommodations. Lenders are well advised to insist on a pre-negotiation agreement, often referred to as an « NAP, » as a precondition for such communications. Many provisions are important to be included in an ANP. While the scope and complexity of an ANP will vary considerably depending on the familiarity of the parties and the type of loan, an ANP should at least provide a fundamental description of the current state of the relationship between lenders and borrowers, including the approval of all defaults and the confirmation of all credit alliances. A well-developed ANP should also provide that any negotiation, discussion, draft document or loan amendment proposal is not binding until a final agreement is signed and implemented. An ANP should include provisions to preserve the lender`s rights and remedies already granted in the loan documents, provide for the reciprocal termination of the ANP by one of the parties for some reason, and confirm the ground rules for transaction negotiations. Other provisions that are often contained in well-developed ANPs include no claims against lenders` provisions, provisions relating to the method, time, form and structure of communications; The provisions for the appointment of agents; and provisions that all discussions and writings are confidential and inadmissible for evidence. From a legal point of view, an ANP is a contract and must meet certain contractual requirements that must be deemed enforceable. In general, the creation of a contract requires fair consideration and mutual consent to a particular statement. Since the courts generally conclude that neither lenders nor borrowers have an obligation to participate in transaction or training interviews, most courts in the final body consider that a lender`s agreement to enter into negotiations is sufficient and therefore no additional consideration is provided in the ANP itself. The lender will generally want the ANP to cover past and future discussions.
From a technical point of view, this goes beyond maintaining the status quo at the time of the creation of the ANP, but it may be unacceptable for a lender to maintain its right to claim claims on the basis of an initial interview with the borrower prior to the preparation and closing of the ANP. It is advisable for lenders to do everything in their power to postpone these discussions until the ANP is engaged. In addition to the disintegity of these previous discussions, THE ANPs will sometimes include some or all of the following points that are beneficial to the lender: (i) a ratification of existing loan documents, (ii) a statement on outstanding debt, (iii) confirmation that the lender has fulfilled all of its loan document commitments, iv) if the loan is late , recognition of default and defence waiver, (v) the release of debts on the lender and (vi) an agreement authorizing the lender to discuss the loan and property with other parties who provide equity and equity financing to the property and other creditors.