Blocking majorities

The following Restructuring & Insolvency practice note provides comprehensive and up to date legal information covering:

  • Blocking majorities
  • Coronavirus (COVID-19)
  • Initial steps
  • Majorities in syndicated loans
  • Majorities in European bonds
  • Majorities in US bonds
  • Practicalities
  • Company's rights to acquire the debt
  • 'Snooze and lose'
  • Disenfranchisement
  • More...

Blocking majorities

It's important to consider the underlying finance documents to determine the requisite majorities of creditors which can block certain actions necessary to maintain an effective standstill, and to complete a successful restructuring (see Practice Notes: Key elements of a standstill agreement).

Coronavirus (COVID-19)

This content is affected by the proposed changes to UK insolvency laws as a result of the coronavirus (COVID-19) pandemic. For further details, see Practice Note: Reform of UK insolvency laws. For related news, guidance and other coronavirus resources to assist practitioners working on restructuring and insolvency matters, see: Coronavirus (COVID-19)—Restructuring & Insolvency—overview.

Initial steps

Increasingly companies have many different types of creditor, each with conflicting motives.

It's important to review the finance documents and any intercreditor agreements (see Practice Note: Intercreditor agreements for R&I lawyers) to determine for each tranche of debt:

  1. what majorities are required from each creditor constituency to waive any covenant breaches/events of default (common terms in a standstill agreement) or amend the finance documents

  2. the process for enforcement actions plus the role of any security trustee/collateral agent/facility agent

  3. whether there are any buy-out rights

A valuation (see Practice Note: Where the value breaks and negotiating strength) will identify creditors likely to exercise blocking rights; those close to where the value breaks will maximise any blocking rights they have to secure a better deal.

Majorities in syndicated loans

For loans provided by a group

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