Here, the scenarios take a more exotic twist.
Lending on properties owned by foreign governments is fascinating stuff.
In the last 10 years there have been a couple of notable cases where bridging lenders lent to foreign governments.
In two such cases – one where the loan was to Kosovo and another where it was to the Democratic Republic of Congo – the lenders have been severely burnt.
The reality is that nations typically have significant sources of credit so the real question is who actually needs this money?
Often the reality is that the person purporting to act for the government is not authorised to do so and actually is committing a fraud.
Putting this aside however, the legal position of the lender on the face of it can often appear sound. If the property is not an embassy then it is not subject to immunity and if the charge is registered what could go wrong?
The answer is everything.
The bottom line is when attempting to repossess the property of a sovereign nation you essentially are undertaking a declaration of war to get control of it.
This is a route that has, in the cases noted above, already proven to be beyond the means of even the largest of specialist lenders.
If no petition for bankruptcy has been lodged, but one is still only potential, then it is safe from a legal – if not necessarily an underwriting perspective – to refinance the borrower out of trouble.
However, once the petition is lodged there is only one way to do it and this itself is not a process without risk.
The lender’s solicitors must attend the hearing thus ensuring that all pre-existing creditors who have a prior claim have come out of the woodwork, and use a series of undertakings to essentially complete the refinance there-and-then to enable the claimants to be satisfied and the petition dismissed.
Any other route risks the charge not being registered ahead of prior claimants.
After the client has been declared bankrupt any attempt to provide funding becomes much harder still and it would be wise to avoid.
An automatic discharge occurs after six months but this is really meaningless and any funding would need to be arranged with the full consent and knowledge of the administrators of the bankruptcy and supported by any necessary court orders.
As with the other scenarios there is no quick yes or no answer.
The main challenge is determining that your borrower is the person that owns the company and its legal status and asset position is suitable.
It also primarily depends on the quality of information in the country in question.
In short with the right solicitors and authorised agents it is doable in such places as the British Virgin Islands and Panama.
But countries like Sierra Leone – where their version of Companies House was burnt down in the civil war – are naturally best avoided.
This has been a light-hearted look at what is and is not doable in bridging, but the applications covering these areas are relatively commonplace.
When looking for the right bridging lender it pays to approach those with a wealth of experience with a track record in dealing with complex cases, otherwise it may leave the applicant high and dry.