EB5 Investors Magazine Volume 5, Issue 2 - Page 114

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