from City Blog
https://www.gothamgazette.com/city/8695-city-officials-debate-what-to-do-about-taxi-medallion-debt-crisis
Friday, July 26, 2019
Thursday, July 25, 2019
Wednesday, July 24, 2019
Monday, July 22, 2019
Thursday, July 18, 2019
Wednesday, July 17, 2019
Taxi medallion auction price hits new low Crains New York Blog
An auction Thursday of 16 medallions at an East Elmhurst, Queens, hotel
came to an early end, with just three sales and a top price of $138,000.
https://www.crainsnewyork.com/transportation/taxi-medallion-auction-price-hits-new-low
https://www.crainsnewyork.com/transportation/taxi-medallion-auction-price-hits-new-low
Tuesday, July 16, 2019
Another
Taxi Medallion Workout Success Story
Crains New York reported
on July 11, 2019 that an auction of 16 medallions at an East Elmhurst, Queens,
hotel came to an early end, with just three sales and a top price of $138,000.
Regrettably, this
article demonstrates that taxi medallions continue to drop in price.
As
many readers of this blog know, Jim Shenwick has developed a niche practice
representing “underwater’ taxi medallion owners.
The
strategies used by Jim Shenwick in taxi medallion workouts are as follows:
First, he
does asset protection planning under New York State law to make sure that if
the negotiations are not successful, or the taxi medallion owner needs to file
bankruptcy, as few assets or property of the medallion owner would be
available to creditors or the bankruptcy trustee.
Second,
he commences aggressive negotiations with the bank (that holds the medallion
loan), seeking that they “take back” the underwater medallion. This is known as
a “walkaway”, or a “surrender”, of the medallion and it is a form of “out
of court” workout. There are tax implications regarding the take back of a
medallion by a bank under Section 108 of the Internal Revenue code, and those
issues have been discussed in prior blog posts by Jim Shenwick.
Third, if
the out-of-court negotiations do not work, in appropriate cases Jim advises the
medallion owner to file for Chapter 7 bankruptcy (also discussed in prior blog
posts).
Fourth,
if neither of the options described above work, Jim then seeks a modification
of the medallion loan with the bank.
Recently,
Jim Shenwick concluded a successful negotiation regarding a medallion loan
modification and the facts and strategy are discussed below.
The
facts: An individual owned one taxi medallion subject to a loan on the
medallion in the amount of $650,000. The individual also owned a house in
Nassau County with a fair market value of approximately $600,000 and the house
was not subject to a mortgage. The medallion was being leased out by a
management company and the cash flow from the lease was not covering the
monthly loan payment to the bank (a common problem). For several months, the
client had been using money from their savings and checking account (out of
pocket) to make up the difference. However, based on the property that the
client owned and their age, they would be unable to make those payments
indefinitely and they were nervous and stressed about their situation.
The
Strategy:
Jim Shenwick was retained to begin negotiations with the bank. Based on
the value of the house and the amount of equity in the house, the bank
indicated that they would not accept a surrender of the medallion. He then
agreed to a modification of the medallion loan so that after the modification,
the cash flow generated from the leasing of the medallion would equal the monthly
medallion loan payments- the loan would be cash flow neutral.
While
the result was not as ideal as a surrender of the medallion, under the
circumstances at that time, it was the
best solution for the client. The modification eliminated the need for
litigation and a bankruptcy filing by the client. In the case of
bankruptcy, based on the equity in the house, the client would have lost their
house.
In
a loan modification there are four variables: 1) The amount of the loan 2) The
interest rate on the loan 3) The term of the loan 4) The amortization schedule
for the loan.
Once
these four variables are determined, a loan amortization table can be used
to determine the monthly loan payments.
Let's
now discuss those factors and how they applied to the medallion loan
modification. First, Jim asked the bank to write the loan down to the
value of the medallion and the they refused (the amount of the loan for
purposes of the loan modification was $650,000). Second, the bank agreed to an interest
rate of 3.75% for the modification. Third, the bank agreed to a two-year term
for the loan. The client requested a three to five-year loan repayment term,
but the bank refused. Fourth, the bank advised that the loan be interest only to
lower the monthly payments- which the client agreed to.
Based
on the above factors, the parties agreed to modify the loan. After the
modification, the cash flow generated from leasing out the medallion equaled
the monthly loan payments and the medallion owner/ borrower no longer had to
“go into their pocket” to cover the monthly payments.
While
the solution was not perfect, under the facts and circumstances of this case it
was the best result for the client. Effectively, we have “kicked the can”
down the road for two years with the hope that medallions will increase in
value during that period of time. If medallions do not increase in value, the
client can either do another loan modification, seek a surrender of the loan,
or file for bankruptcy.
Anyone
who is interested in discussing an underwater taxi medallion loan modification
or similar strategy is advised to contact Jim Shenwick
Wednesday, July 10, 2019
Monday, July 08, 2019
Sunday, July 07, 2019
Wednesday, July 03, 2019
Tuesday, July 02, 2019
Monday, July 01, 2019
Subscribe to:
Posts (Atom)
