Workout Economics Calculator

Workouts balance lender recovery against borrower capacity.

Lender loan basis

Foreclosure recovery

Workout proposal NPV

Workout advantage

$2,500,000

Lender haircut

$4,500,000

Workout recovery %

0.80%

How the math works

Workout advantage = workout NPV − foreclosure recovery. Haircut = basis − workout.

$17.5M workout − $15M foreclosure = $2.5M advantage. Haircut $4.5M; 79.5% recovery.

How to Use

Enter lender loan basis.
Enter foreclosure recovery estimate.
Enter workout proposal NPV.
Read lender decision.

Frequently Asked Questions

Workout triggers?

DSCR below 1.0×. Maturity default (can't refi). Covenant breach without cure. Property value decline below loan balance. Tenant loss impacting cash flow. Each triggers different workout strategy.

Common workouts?

Rate modification (reduce rate 100-300 bps). Term extension (1-5 years). Partial forgiveness (5-30% haircut). Forbearance (payment pause). Deed-in-lieu. Modified to market rate + profit participation.

Lender decision?

Net recovery comparison: workout NPV vs foreclosure NPV. Account for time (2-3 yr foreclosure) and cost (15-25% of value). Workout preferred if NPV within 5-10% of foreclosure. Institutional relationships matter.

When does a lender negotiate vs foreclose?

Lenders calculate their net recovery from foreclosure (asset value minus legal, time, and sale costs) and compare to any workout proposal. If your offer nets the lender more than foreclosure, and you present it with clear sources of capital, most lenders will engage. Bring a credible sponsor, documented sources, and a timeline — vague asks get declined. Build the relationship before distress, not after.