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Pratt’s Journal of Bankruptcy Law published an article written by Michael R. O’Donnell, Michael P. Crowley and Kevin Hakansson in its February/March 2022 edition. The article, "New Jersey Appellate Division Holds Material Adverse Change to Borrower’s Financial Condition Sufficient to Invoke Cross-Default Provisions," provided a review of a decision by the New Jersey Appellate Division, which recently affirmed the trial court’s grant of summary judgment in favor of a bank, holding that the bank had the right to refuse prepayment on two of its loans based on non-monetary defaults on a third loan when the loan documents contained cross-default provisions. This case is of interest as it reaffirms the enforceability of cross-default provisions and that courts will indeed recognize and enforce non-monetary defaults such as a material adverse change in a borrower’s financial condition and debt service coverage ratios.
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