If the current economic downturn continues, the number of borrowers that default under debt agreements will increase significantly. A previously prized borrower that once could dictate terms to its lender likely will find itself with fewer options when facing a default and will be forced to work with its existing lender to obtain either a waiver or a forbearance agreement.
Waiver and forbearance agreements contain many similar provisions, and they both provide a certain amount of relief for the borrower. One significant legal difference: A forbearance agreement will not eliminate the default. To the contrary, a forbearance agreement expressly preserves the default, and the lender only agrees to refrain from exercising its remedies during the forbearance period. A waiver agreement, on the other hand, waives the default and restores the parties to their pre-default positions.
