Business Glossary

situation, such as a bad loan or troubled firm, where remedial measures are being taken.

a mutual effort by a property owner and lender to avoid foreclosure or bankruptcy following a default; generally involves substantial reduction in the debt service burden during an economic depression.

Example: Because of an economic slowdown, the hotel suffered high vacancy rates and failed to generate enough income to meet mortgage payments. The owner approached the lender about a workout. It was agreed to reduce the outstanding loan principal and extend the maturity date to reduce the debt service. In turn the lender would participate in the income when the economy recovered and hotel income exceeded a specified amount. See participating mortgage.