# Case: Two simultaneous closings compete for sponsor liquidity

Canonical: https://commercialdebtadvisory.com/cases/two-simultaneous-closings-compete-for-sponsor-liquidity/
Status: Published
Publisher: Jaken Finance Group

**Hypothetical sponsor with two scheduled acquisitions.** A sponsor has $2 million of cash and a $1.4 million securities account. Of the securities, $400,000 is already pledged and unavailable. The lenders accept the remaining $1 million at a hypothetical 70% liquidity value, or $700,000. An unrelated, firm $400,000 commitment must also be funded.

Eligible resources after the outside commitment are therefore **$2.3 million**: $2 million cash plus $700,000 eligible securities less $400,000. The pledged securities are not deducted again; they were already removed before the haircut.

Deal A requires $1.2 million of closing equity and a separate $300,000 post-closing qualifying-liquidity balance. Deal B requires $900,000 of closing equity and its own $200,000 post-closing qualifying-liquidity balance. Assume each lender accepts cash or unpledged securities at the stated haircut for its retained-liquidity requirement. The balances must be allocated to distinct designated accounts and cannot serve both loans. Closing equity and the outside commitment, however, require settled cash. These are invented requirements, not universal lender standards.

## Why the two standalone presentations appear adequate

Viewed alone, A consumes $1.5 million and leaves $800,000 of the $2.3 million eligible pool. Viewed alone, B consumes $1.1 million and leaves $1.2 million. Each individual presentation appears to have a substantial cushion.

The mistake occurs if both presentations show the same starting assets without identifying the other pending closing. Together, required resources are **$2.6 million**, leaving a **$300,000 shortage**. The deals have not become more expensive; their evidence packets have claimed the same dollars twice.

The [OCC CRE handbook's borrower and guarantor discussion](https://www.occ.gov/publications-and-resources/publications/comptrollers-handbook/files/commercial-real-estate-lending/pub-ch-commercial-real-estate.pdf) supports considering broader financial obligations and liquidity. It does not establish this case's asset haircut or reserve segregation. Those assumptions must be replaced with the actual lenders' definitions and agreements.

## Prepare a single allocation ledger

| Resource or use | Eligible amount | Running unallocated balance |
|---|---:|---:|
| Cash | $2,000,000 | $2,000,000 |
| Unpledged securities after assumed haircut | $700,000 | $2,700,000 |
| Outside committed funding | −$400,000 | $2,300,000 |
| A closing equity | −$1,200,000 | $1,100,000 |
| B closing equity | −$900,000 | $200,000 |
| A required retained balance | −$300,000 | −$100,000 |
| B required retained balance | −$200,000 | **−$300,000** |

The table measures **eligible liquidity, not wire-ready cash**. Before any securities sale, $2 million of cash less the $400,000 outside commitment leaves $1.6 million for $2.1 million of closing equity: an immediate **$500,000 cash deficit**, in addition to the $300,000 deficit under the combined eligible-resource test. These are two tests of the same asset pool, not additive shortages. Selling only $500,000 of unpledged securities at par supplies the closing wires, but leaves $500,000 of securities worth $350,000 under the haircut for $500,000 of retained-liquidity requirements—a remaining $150,000 eligibility deficit.

The negative final amount is an allocation deficit. It does not imply the account has actually been overdrawn. It identifies the capital that must be supplied, released from a genuine requirement, or saved through an effective change before both transactions can satisfy the assumed conditions.

The two retained balances are not spent acquisition expenses. They remain assets, but they are committed to distinct liquidity obligations. Treating them as available for another closing would violate the case's stated allocation rules.

## Test the cash-realization alternative

Suppose the sponsor can sell the full $1 million of unpledged securities for $1 million net cash, with no taxes, trading costs or price movement in this simplified scenario. Cash receives 100% eligibility under the hypothetical lender definitions. This replaces $700,000 of eligible securities with $1 million of cash, increasing recognized resources by **$300,000**.

That exactly closes both tests: $3 million of settled cash less the $400,000 outside commitment and $2.1 million closing equity leaves $500,000, allocated $300,000 to A and $200,000 to B. It creates no economic gain: the change comes from the eligibility convention. Actual taxes, costs, market movements and settlement dates may prevent the full $300,000 improvement. The sponsor should obtain evidence of the sale and settled accessible cash, not rely on a brokerage screenshot or an intended order.

The previously pledged $400,000 remains excluded. Selling or borrowing against it requires its own permitted release and liability analysis. An additional credit line could produce cash while also creating debt, collateral restrictions and new reporting obligations; it is not equivalent to unencumbered proceeds from an asset sale.

## Test whether staggering actually helps

Under the eligible-resource ledger, closing A first leaves $1.1 million before its retained balance and $800,000 after allocating that balance. B needs $1.1 million including its retained balance. A later B closing still has the same $300,000 shortage unless new eligible resources arrive or a genuine obligation ends.

Changing the calendar alone does not release A's $300,000. If the sponsor expects a distribution from another investment before B, record the amount, date, conditions and authority to make it. A hoped-for payment after B's closing cannot fund B's initial wire.

Likewise, a temporary bridge contribution that must be returned immediately after closing should appear as a repayment obligation. A lender's required continuing liquidity cannot be satisfied honestly by counting money scheduled to leave before that requirement ends.

## Use the ledger as a closing control

Assign one owner to update the combined ledger after any material bank balance change, new commitment or revised closing statement. Reconcile each allocated amount to its destination account and identify who can authorize a transfer. Share the relevant current obligations with the lenders as required rather than presenting incompatible snapshots.

Both deals may be attractive and individually financeable. Under the base evidence, they are not jointly funded. The sponsor needs $300,000 of additional eligible resources or a documented change in requirements, and must demonstrate that the resulting cash will be available on the actual closing dates and remain available for the specified ongoing obligations.


## Source references
- [OCC — Commercial Real Estate Lending, version 2.0](https://www.occ.gov/publications-and-resources/publications/comptrollers-handbook/files/commercial-real-estate-lending/pub-ch-commercial-real-estate.pdf) — Borrower and guarantor analysis, printed pp.29–30 · Checked 2026-10-21 · Bank supervisory context. March 2022 publication, with March 20, 2025 reputation-risk edits. All case amounts, thresholds and contractual conditions are invented teaching assumptions.