A CLOSER LOOK AT THE LAW
consensual arrangement where the NCE, and possibly
a new investor, becomes the new financing partner and
takes over control of the project. It is generally unrealistic
to assume investors will contribute additional capital to
salvage the project. Therefore, a third-party funding source
and an industry expert would be desirable to add to the
project team. the project as a priority in order to preserve jobs and
then work out the related financial economics. To the
extent there is any elements of fraud, the SEC may be
contacted to otherwise take affirmative action to the
extent necessary in order the appoint a receiver to take
over control of the asset if the developer is deemed to
be adverse and otherwise acting inappropriately.
Another concern is the senior loan and the applicable
inter-creditor agreement that many times is in existence,
which will not allow a junior lender with a mezzanine
pledge or even a second mortgage to otherwise take
action without paying off the senior loan. The SEC will freeze assets and impose a procedure
that will potentially enable a change of management.
However, this procedure is expensive and can be time
consuming and there is no assurance that jobs will
ultimately be created.
There are exceptions where the inter- creditor
agreement would allow the NCE lender and/or equity
provider to bring in a qualified joint venture partner to
take over the position of the developer. The SEC generally focuses on the financial issues and
is less likely to be concerned about the job creation
component. However, this philosophy has been
reconsidered in the Jay Peak case where the SEC
rec