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The Bottom Line:

  • Borrowers and issuers have been engaging in “Liability Management Transactions” with increasing frequency since the onset of the pandemic in 2020.
  • This includes both more established types of transactions, as well as more novel structures such as the “doubledip” and structures that combine several different common LMT elements.
  • In this report, we provide a brief description of the various flavors of Liability Management Transactions that we have seen, and we also include graphical representations of the most common structures.
  • We also summarize each of the Liability Management Transactions that have been tracked by Covenant Review and LFI since 2014, through the end of the first quarter of 2024.
  • We also provide data regarding postbankruptcy recovery rates and how they were impacted by LMTs for issuers that emerged from bankruptcy protection during the 2023 calendar year.


As has been widely discussed by various market pratictioners and commentators, the frequency of loan and bond issuers engaging in socalled Liability Management Transactions (“LMTs”) has increased dramatically over the past several years. This report is a compendium of all Liability Management Transactions tracked by Covenant Review and sister company LevFin Insights since 2014, including both public and private transactions. We intend to update this report on a quarterly basis. In this report, we provide additional details for LMTs that were either launched or completed in Q1 of 2024, as well as some updates to previously announced LMTs. We also share analysis performed by the Leveraged Finance team at Fitch Ratings on postLMT recovery rates for issuers that have conducted one or more LMTs and subsequently filed for and emerged from Chapter 11 bankruptcy protection.

Types of LMTs

Covenant Review categorizes LMTs into four major groups: DoubleDips, DropDowns, Uptiers, and “Miscellanous.” In the last category, we include socalled “Chewy Releases” as well as other transactions that involve the combination of multiple other types of LMTs. We provide a brief description of the features of each of these transactions, though we note that each transaction is driven by the specific capital structure and covenant requirements. Accordingly, there are variations within each of the foregoing prototype LMTs. Both the fourth quarter of 2023 and the first quarter of 2024 witnessed several transactions that incorporated multiple LMT structures, which we describe in the transaction tracking chart below.

That said, there are common themes and document flexibilities that are utilized in these LMTs. Generally speaking, LMTs involve a balance sheet restructuring (conducted outside, of course, of the bankruptcy courts). This can be achieved in many ways, including through priming debt incurrences, equal priority claims on collateral assets, collateral stripping through investments or asset sales, and coercive covenantstripping amendments, among other techniques.

Double-Dip and Pari-Plus LMTs 


DoubleDips, still the newest flavor of LMTs, involve the potential enhancement of claims against existing collateral assets. This usually occurs via the following structure: (1) incurrence of a new debt facility at a nonguarantor subsidiary of the existing borrower / issuer, either within or outside of the restricted group; and (2) onlending the proceeds of the new debt facility to the existing borrower / issuer via an intercompany loan facility, with the new nonguarantor subsidiary borrower as the lender. The facility incurred under step one is usually guaranteed and secured by the existing guarantors and collateral assets that provide credit support for the existing debt obligations. On top of that, the intercompany loan facility is also guaranteed and secured by the same guarantors and collateral. In this way, the secured claims include both of the facilities incurred under clauses (1) and (2), as the intercompany loan facility provides the thirdparty lenders with an indirect claim against the guarantors / collateral assets. This is because the intercompany loan itself is an asset of the new nonguarantor subsidiary borrower, which is often also pledged for the benefit of the thirdparty lenders. In other words, for each $100 of new money, the new lenders now have $200 of claimshence a “double dip.” 


Another style of DoubleDip is the “PariPlus” transaction structure, which was utilized in the Sabre LMTs from 2023. This involves the provision of additional credit support to one group of lenders by using an intercompany loan structure borrowed from DoubleDips. In the Sabre transaction, this included the (1) incurrence of a new money term loan facility by an unrestricted subsidiary, (2) guarantees by restricted foreign subsidiaries of the unrestricted subsidiary obligations under the new term loan, and (3) subsequent onlending of the new term loan proceeds to the existing guarantor group via a secured intercompany loan. As with the “regular” DoubleDip LMT structure, the intercompany loan incurred in this last step is usually pledged for the benefit of the new money lenders (ranking equal to the existing credit agreement obligations). 

Double-Dip and Pari-Plus transactions are usually facilitated by the following covenant provisions:

  • Debt and Liens Covenant capacity:
    • The related credit agreements and/or indentures must have sufficient debt and liens capacity to allow both the debt incurrence by the applicable nonguarantor subsidiary (i.e., the “New Money Loan”), and the subsequent intercompany loan facility incurrence of the onlent proceeds of the New Money Loan. Depending on the use of proceeds of the New Money Loan, this could potentially qualify as “refinancing debt” in respect of existing pari passu secured obligations (as was the case in Sabre and some of the other transactions we have covered).
    • The debt agreements also must provide sufficient capacity for the guarantees (and collateral support, if any) provided by the existing credit parties in respect of the New Money Loan obligations incurred by the nonguarantor subsidiary.
  • Investments Covenant capacity:
    • As the provision of a guarantee is also normally an “Investment,” capacity under the Investments Covenant is usually required as well. Often, however, the Investments Covenant includes a generic crossreference permitting any debt that is permitted to be incurred by the Debt covenant under the Investments Covenant as well. As such, if the Debt covenant provides sufficient capacity, often this will be sufficient to justify the Investment portion of the DoubleDip.
  • Other potential relevant provisions:
    • There also must not be any requirement that intercompany loans and guarantees be subordinated to other obligations; this is a common limitation but often only applies to intercompany loans using the dedicated intercompany debt basket (rather than a “global” requirement that overrides all existing debt and liens baskets).
    • To the extent an unrestricted subsidiary is the borrower under the new facility, there must also be no limitation on credit support provided by the restricted group in respect of unrestricted subsidiary debt obligations.

Although the ultimate enforceability in bankruptcy of the two claims for the full amount for Double Dip transactions is still an open question, it is certainly clear that borrowers and issuers utilized this structure with increasing frequency throughout 2023 and this trend has continued into 2024, though several of the more recent transactions have included a DoubleDip LMT combined with an Uptier LMT or a DropDown LMT.

See Annex I below for a visual representation of a prototypical DoubleDip LMT, and Annex II below for the portrayal of a PariPlus LMT.

Drop-Down LMTs

Drop-Down LMTs generally take one of two flavors: those utilizing unrestricted subsidiaries, and those utilizing non-guarantor restricted subsidiaries.


  • DropDowns utilizing unrestricted subsidiaries: These transactions typically involve the transfer of one or more assets of the relevant borrower to an Unrestricted Subsidiary, which is itself not subject to the covenants. That Unrestricted Subsidiary, in turn, can either incur debt that is structurally senior in respect of the transferred asset(s), or alternatively sell the asset(s), which then results in the net cash proceeds of any such asset sale not being subject to the credit agreement asset sale sweep.
  • DropDowns utilizing restricted nonguarantor subsidiaries: These transactions, which are somewhat less common, typically involve the transfer of one or more assets within the restricted group from a guarantor to a nonguarantor Restricted Subsidiary, as permitted by the Investments covenant. That entity, in turn, can incur debt to the extent permitted by the Debt covenant, and that new debt (even if unsecured) will also be structurally senior to the claims of the existing credit agreement lenders.

Drop-Down LMTs can (and increasingly have been) combined with Uptier LMTs in a manner described below. See Annex III below for a visual representation of a Drop-Down LMT.

Uptier LMTs

Uptier LMTs typically involve amending an existing credit agreement with the consent of a majority lender group to permit the incurrence of a senior priority debt tranche and the nonpro rata exchange of some or all of the existing consenting lender credit agreement debt into the new priority tranche. This may or may not be accompanied by a “new money” debt commitment, or may simply involve the exchange of preexisting debt. Although some uncertainty was created due to court rulings in the Serta and Boardriders litigations, it was clear that borrowers continued to utilize Uptier LMTs after Judge Jones’s ruling in the Serta Simmons Chapter 11 litigation that dismissed most of the relevant minority lender claims. 

However, the recent decision by Judge Isgur Wesco / Incora litigation may cast some doubt on the continued efficacy of these transactions, or at least for those with a vote rigging element (i.e., where an amendment is structured to allow for the incurrence of additional incremental debt in order to meet a specific consent threshold). On January 14, 2024, Judge Isgur of the Southern District of Texas Bankruptcy Court issued several lenderfavorable rulings, including that certain of relevant voting provisions under the related indentures were ambiguous as a matter of law and denying defendents’ motion for summary judgment on tortious interference claims.1 This somewhat surpising lender win was due at least in part to a determination that Incora’s twostep transaction was (arguably) part and parcel of the same single series of transactions, under the “step transaction” or “integrated transaction” doctrine. Similar arguments are currently being made by certain of the lenders involved in Robertshaw’s various litigations, as part of the claims also involve a vote rigging element. Although a full review of this decision is outside of the scope of this article, we note that this decision stands in direct contrast to Judge Jones’s Serta ruling, and as such may provide excluded lenders with some hopes of future challenges to Uptier LMTs. 

See Annex IV below for a graphical representation of a paradigmatic (Serta) Uptier LMT.

Chewy LMTs 

The Chewy transaction involved (in part) the release of a restricted subsidiary guarantor from its obligations under the existing PetSmart credit agreement due to the transfer of a portion of equity of Chewy to an unrestricted subsidiary, as well as the spinoff of another portion of Chewy equity to the equity sponsor. Because nonwholly owned subsidiaries are typically excluded from the guarantee requirements under broadly syndicated credit agreements, this could result in valuable subsidiaries being released from their guarantee and collateral support of existing obligations through the transfer of a small portion of equity outside of the restricted group (Chewy itself, however, remained a restricted, but nonwholly owned and nonguarantor, subsidiary). In response, the market has witnessed an uptick in “Chewy blocker” provisions, which seek to address this flaw in a myriad of ways. 

Chewy LMTs remain a relatively rare occurrence even in this day and age of creative LMTs, in part because the released guarantor usually remains a restricted subsidiary (that is still subject to the limitations and restrictions of the covenants). Indeed, Chewy LMTs function very similarly to DropDowns, but DropDowns (at least those involving unrestricted subsidiaries) almost always provide significantly greater flexibility for the borrower in question.

“Combined” LMTs, Envision LMTs (and other miscellaneous LMTs) 

Recently, several LMTs have included multiple of the abovementioned elements. This occurred in the Envision transaction, where the sponsor (KKR) combined elements of both DropDown and Uptier LMTs by both designating valuable assets (of a specified subsidiary) as an unrestricted subsidiary, followed by an uptier exchange offer transaction. We explain the details in our Envision Blocker report, but this transaction illustrates the “creativity” of sponsors in the LMT space. 

There also are a smattering of additional LMT transactions, which include assetbased revolverrelated amendments, debt incurrences in reliance on securitization baskets, payment default grace periodrelated amendments, collateral releases, and other kinds of coercive exchanges. 

Post-LMT Recovery Rates 

Our colleagues at Fitch Ratings have undertaken an analysis of recovery rates following a Chapter 11 restructuring process for issuers that have conducted one or more LMTs prior to filing for bankruptcy protection. Their data, which is based on postemergence expected recoveries pursuant to the approved restructuring plan in the related bankruptcy, illustrates that there is a divergence in overall and relative recoveries for first lien lenders between issuers that have and have not conducted LMTs prior to a bankruptcy filing. 

  • For issuers emerging in 2023, issuers who have executed LMTs prior to bankruptcy experienced weighted average aggregate recoveries of 47% on their original firstlien claims in 2023. This compares to a 57% average for issuers who have not excecuted LMTs prior to filing.
  • For issuers emerging in 2023 that executed one or more LMTs prior to a filing, there was also a material divergence in recovery rates for “in group” versus “out group” lenders. The most notable examples of these were the following: 
    • Envision / AmSurg: In the Envision / AmSurg restructuring, the participating lenders (which exchanged loans into first and second lien loans at AmSurg) saw an approximately 85% blended recovery rate on their claims against the AmSurg subsidiary and roughly 30% on claims against the “remainco” Envision entities. The nonparticipating lenders, who were left in a “fourth out” or worse position relative to the other lenders at remainco, recovered essentially nothing.
    • Serta Simmons: In the Serta Simmons restructuring, which was the paradigmatic uptier transaction, the participating prepetition first lien lenders recovered 100% on their new money firstout claims and roughly 74.7% on their uptier exchange secondout claims, for a blended recovery rate of around 79.5%. This contrasts with an approximate 1.5% recovery for nonparticipating “thirdout” prepetition first lien lenders.
    • TPC Group: In the TPC Group restructuring, the “priming” first lien noteholders were rolled up into the DIP facility and eventually recovered 100%, while the nonparticipating first lien noteholder group recovered an estimated 44.1%.
    • Revlon: In the Revlon restructuring, the participating 2020 “Brandco” facility lenders recovered 100% on their firstout new money claims under the 2020 Brandco facility, and approximately 52.5% on their secondout claims reflecting the exchange of term loans under the company’s existing 2016 term loan facility. The nonparticipating lenders who continued to hold existing 2016 term loans were estimated to recover only 20%.
    • Diebold: In the Diebold restructuring, the superpriority term loan tranche obligations were rolled up into a DIP facility and eventually recovered 100%, while the nonparticipating first lien lenders were estimated to recover approcimately 38%.
    • Cineworld: In the Cineworld restructuring, the prepetition priming term loan facilities were rolled up into the DIP facility, and eventually recovered 100%. The nonparticipating legacy term loan facilities, however, recovered only an estimated 3.4%.

LMT Transaction Charts

In the following charts, we outline each of the LMTs that have been covered since we began tracking these types of transactions in 2014, together with the sponsor (if any) that drove the transaction, a brief description of what happened in the transaction, and the ultimate transaction outcome (if known). As we can see from the details below, often a LMT still leads to a bankruptcy filing.

LMTs with Primarily Douple-Dip Elements

Serta-style Uptier LMTs

Drop-Down LMTs

Multiple Element LMTs, Chewy / PetSmart LMTs, and Other Miscellaneous LMTs


As interest costs continue to remain comparatively high relative to prior years and default rates have ticked up over time, we expect that more companies will seek to opportunistically refinance near-term debt maturities in various creative and novel ways. We will continue to monitor the debt markets for potential future liability management transactions and any related judicial decisions in due course.



Annex I 

Double-Dip Representative Structure (At Home) 


Annex II 

Pari-Plus LMT Representative Structure (Sabre) 


Annex III 

Drop-Down LMT Representative Structure 


Annex IV 

Uptier LMT Representative Structure (Serta) 

Justin Forlenza, J.D.
Senior Covenant Analyst
Covenant Review



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