Cooperation agreements (also known colloquially as “loyalty pacts” or simply “co-ops”) have over the last few years become a popular creditor-side maneuver in liability management transactions (LMTs). Generally speaking, cooperation agreements are intended to establish a unified bloc of creditors (both lenders and bondholders), which are then better positioned to defend against aggressive LMTs, particularly priming transactions (or any other LMT where some level of creditor consent is needed). While in theory dampening “creditor-on-creditor” tendencies, such agreements can also have the opposite effect of emboldening certain parties to engage in a more “rough and tumble” negotiations. This is especially true in the United States, where “tiered co-ops” have become a regular way occurrence, with different groups of
creditors party to the co-ops benefitting from different economics