Creditor Rights Coalition Special Feature: The Latest Game of Whack-a-Mole Between Sponsors & Lenders

Creditor Rights Coalition Special Feature

Creditor Rights Coalition Special Feature: The Latest Game of Whack-a-Mole Between Sponsors & Lenders

Ian Y. Feng, J.D. - Senior Director, U.S. Leveraged Loans, Covenant Review

31 October 2025

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Insights into analysis of Liability Management Provisions, including:

  • Anti-Cooperation and Anti-Counsel Provisions: Discover how new process control mechanisms in Liability Management Transactions are chilling lender cooperation by injecting legal uncertainty and friction into negotiations, even before enforceability is tested in court.
  • Expanding Disqualified Lender Lists: Learn how borrowers are gaining decisive influence through syndicate control provisions, including absolute consent rights over assignments to “distressed investors” and caps on individual lender holdings exceeding negotiated thresholds.
  • Net Short Disenfranchisement and Voting Caps: Understand how provisions excluding lenders with net short CDS positions and imposing voting limitations are reshaping who holds negotiating power in future restructuring scenarios.
  • Market Proliferation in BSL Space: See how these borrower-friendly provisions are proliferating in the broadly syndicated loan market with minimal pushback, potentially reducing syndicate depth as lenders fear forced sales at discounts or ex post exclusion.
  • Creditor Countermeasures and Market Implications: Identify why greater discipline at loan issuance and an educated lender pool are the only practical defenses against provisions that set LMT rules well in advance, with the BSL market’s unanimous rejection of anti-cooperation language signaling growing creditor awareness.

Liability management transactions (or LMTs) increasingly resemble an arms race where only borrowers are armed. Provisions that tilt the field toward borrowers are poised to determine how future LMTs unfold, particularly in the broadly syndicated loan (BSL) market. These provisions fall into two categories: (1) process control (e.g., anti-cooperation/ anti-counsel) and (2) syndicate and/or voting control (e.g., expansive DQ lists, voting limitations, and assignability constraints).

Process control, because it implicates enforceability and questions the good faith of the principals, is the more controversial of the two. The implications of provisions that prevent lender cooperation or engagement of counsel is—beyond the obvious shot across the bow from borrowers—largely behavioral.

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