Article/Intelligence
RX 101: Creditor-On-Creditor Violence in Europe: What Is It and Will I Be A Victim?
This installment of the RX 101 and Covenants 101 series explains the basics of what liability management exercises are, what is meant by creditor-on-creditor violence and thoughts on how this may come to affect the European market. In addition, for a selected summary of recent and precedent setting case law which have shaped the landscape of liability management exercises in the U.S. and Europe, scroll straight to ‘A (non-exhaustive) History of Violence’ below. What is a liability management exercise? Before addressing what creditor-on-creditor violence looks like, we need to first understand what the broader concept of a liability management exercise, or LME, captures. LMEs (also known as liability management transactions) are used in a broad range of situations, including the more aggressive forms this 101 will detail below. Less controversially, they capture transactions that stressed as well as non-stressed companies use to manage their liabilities and so can include anything from amend and extends, or A&Es, to debt buybacks, exchange and tender offers and consent solicitations – the possibilities are vast. From this lens, it’s clear that no particular creditor or lender is necessarily getting a rough deal, and as a result, typical LMEs do not need to be seen[...]