How deep does a bankruptcy go, with a Corporate guarantee?

If I buy a NNN lease property from an affiliate company with a corporate guarantee, and they go bankrupt, can I collect from the Parent company? (Which is much larger)
In Buying Property - Asked by Jerry I. - Jan 13, 2009
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Joe V.
Plymouth, MI

This would depend on who exactly the guarantor is. This is always a possibility, so my recomendation is to not buy a property such as you describe unless the tenant (parent company/guarantor) is at least BBB+ rated (S&P). This is my favorite type of property to a w i d e margin. Much easier to finance as well since the lender will be looking at the lease and it's guarator as a measure of it's risk factor...and this type of deal, with the high rated guarantor, makes this type of deal very atractive and low on the risk scale.

Jan 13, 2009
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Anne E.
Appleton, WI

If there is an enforceable guaranty in place, you should be able to collect from the guarantor (which may or may not be the parent company depending on the situation. Of course, if the subsidiary files bankruptcy, there may also be an issue with the parent company also. Guarantys are only valuable if the guarantor has assets and are solvent.

Jan 16, 2009
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Chris S.
Coeur D'alene, ID

All depends on how the lease is written. You'd be well advised to have legal council review the lease in detail with your question in mind.

Jan 16, 2009
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