Overview

“Uptier” exchanges have become the liability management transaction (LMT) du jour for most distressed borrowers, at least in the U.S. broadly syndicated loan (“BSL”) market. Per our quarterly report, in Q1 of 2025, ~70.6% of the LMTs (12 out of 17) launched or closing for those three months included some kind of uptiering component (where one or more groups of existing or new creditors were elevated in priority relative to another group of creditors). While some market prognosticators had suggested a possible reduction in such LMTs in the aftermath of the December 2024 Serta decision, this has clearly not been the case.

Even prior to that decision, however, the market had already moved towards implementing “Serta blockers,” with the explicit purpose of preventing uptiering at the expense of minority lenders. Indeed, through Q1 2025, less than a majority (43.4% overall and 44% of PE-backed loans) still had customary “Serta” loophole language allowing subordination with just majority lender consent. This in turn means that a majority of loans in the JP Morgan Leverage Loan index does include some form of Serta blocker technology. But if that’s the case, why are uptier LMTs still so prevalent? In this report, we analyzed a sample set of 58 LMTs dating from 2019 to present in an effort to answer this question: Are Serta blockers actually worth the ink? For purposes of this report, we focus only on transaction in the US BSL space. Additionally, we also do not explore the exceptions to the “open market purchase” issue raised by the Fifth Circuit’s Serta decision in December 2024.