The following Restructuring & Insolvency guidance note provides comprehensive and up to date legal information covering:
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).
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:
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
the process for enforcement actions plus the role of any security trustee/collateral agent/facility agent
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.
For loans provided by a group of lenders, a security trustee/collateral agent/facility agent is usually appointed (see Practice Note: The security agent and security trust provisions).
The Loan Market Association (LMA) has produced standard terms which many parties use as a starting point for drafting their documentation. Typically the following actions require
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