Won’t Get Fooled Again: How Post-LME Documents Are Setting the Standard for the Next Generation of Lender Protections

Legal Research: Julian Bulaon Key Takeaways: Unlike pre-LME documents, post-LME documents often provide creditors with an expanded set of lender protections, including not only the Big Three protections (J. Crew, Chewy and Serta blockers) but also next-generation protections such as Envision, Pluralsight, At Home and Wesco / Incora blockers. Additionally, post-LME documents frequently feature enhanced sacred rights that bar amendments to these protections without the consent of each lender – introducing a notable layer of protection rarely found in other contexts. Although seasoned investors and advisors know better than to consider any document airtight, the extra protections included in post-LME debt documentation go a long way toward ensuring that participating creditors won’t get fooled again. Liability management exercises, or LMEs, in the United States surged to unprecedented levels in 2024. At least two forces are driving the trend: loose covenants in existing agreements, which provide the contractual flexibility to execute these deals, and a challenging macro environment, making LMEs an appealing – and, in some cases, essential – option for struggling companies to refinance. Not all LMEs are created equal. Some deals freeze out minority creditors completely, while others take a softer, more collaborative approach. Our distressed debt analysts have[...]