This article first appeared in Corporate Rescue & Insolvency, December 2018.

Key points

• Step-in is a versatile tool which gives a lender the right, in certain circumstances, to step-in to a contract between a borrower and its contractual counterparty, and to perform the borrower’s part of the bargain to keep the contract alive.
• It can have much less impact on the actual project or development than the commencement of formal insolvency proceedings, thereby minimising loss.
• Step-in won’t be right for all situations (or for all lenders) and, where there is distress, additional risk factors need to be brought in to a consideration of the lender’s options.

Introduction

Step-in is a self-help remedy. It is a creature of contract and, in a finance structure, gives lenders the right, in certain circumstances, to step-in to a contract between a borrower and its contractual counterparty, and perform the borrower’s part of