Selecta Co-Op Parties Avail Themselves of a Sword Rather Than a Shield; Selecta’s Co-Op Agreement Evaluated

The Cooperation Agreement (the “Co-Op”) entered into by certain of Selecta’s creditors on April 9 has been appended to the complaint (the “Complaint”) filed with the Southern District of New York. The Complaint frames the Co-Op itself as an alleged anticompetitive device, asserting it, among other things:

• Excluded rival first lien holders from joining,
• Mandated block voting to suppress alternative restructurings, and
• Artificially elevated the “Favored Holders’” note value at others’ expense.

In the Complaint, the plaintiffs allege that the exchange transactions were structured “to discourage Excluded Holders from trading their 3O Notes for 1O Notes” given that holders of non-Co-Op 1O Notes would be at the mercy of a hostile majority during the 12-month reduced consent threshold period, creating a Hobson’s-choice dynamic discussed in our June analysis. The terms of the now-disclosed Co-Op shed more light on this dynamic by revealing that the parties to the Co-Op (the “Co-Op Parties”) had not merely threatened but had precommitted to disadvantage non-Co-Op 1O note holders in a subsequent transaction.

The Co-Op could mark a new high-water mark in creditor coordination, moving beyond information sharing into outright transactional control. If upheld and found to be enforceable by the SDNY, it could legitimize hard-wired coordination among favored funds in contested exchanges. If struck down, it could constrain the use of contractual bloc voting and transfer restraints in future liability management exercises, or LMEs, potentially forcing sponsors and counsel to rely on softer “protocol”-based frameworks.

Noting the above, we do observe that this Co-Op appears to be particularly aggressive. Therefore, if it is found to be unenforceable by the SDNY, such a decision could be construed narrowly to limit cooperation agreements with certain aggressive provisions.

We evaluate the terms of the Co-Op below in detail, noting the following salient commercial and legal implications for Selecta.

Market innovation / legal risk frontier: The Co-Op perhaps represents the first trans-Atlantic attempt to institutionalise the “Favored Holder” alliance post-uptier, pushing creditor cooperation to its legal limit.

Sword, not a shield: Rather than a defensive device to protect Co-Op Parties, the Co-Op is aggressive and appears to be a weapon that not only allows for advantageous transactions for Co-Op Parties but expressly disallows “any advantageous treatment” of non-Co-Op Parties.

Litigation exposure: The plaintiffs’ framing of the Co-Op as the mechanism of harm ensures that the SDNY’s determination will serve as the first test of cooperation agreement validity in an LME context with potential implications for Apollo/Envision-style restructurings and future European protocols.

Timing and subject instruments: This Co-Op applies only to the 1O Notes provided to first lien lenders as part of the Selecta Group’s share pledge enforcement, meaning that prior to the enforcement, this Co-Op was not in force. There appears to have been a prior cooperation agreement from December 2024 providing for the enforcement. Accordingly, this challenged Co-Op did not facilitate the original June 12 share pledge enforcement in the Dutch court and applies only to subsequent transactions.

Restrictions: The Co-Op’s transfer restrictions limit assignments of “Subject Instruments” to existing Co-Op Parties or, if the transferee is not already a Co-Op Party, require that it join the Co-Op. Those parties agree to approve a proposed transaction that does not offer “any advantageous treatment to any 1O Notes that are not Subject Instruments.”

Termination: The Co-Op automatically terminates upon “expiry of the 12M Reduced Thresholds,” mirroring the 1O indenture language describing the 12-month period during which sacred rights can be modified with majority consent only. We note that this period appears to be able to be extended indefinitely.

We evaluate in high level the key features of the Selecta Co-Op in the below table, noting how features deviate from market standards seen by Octus.

1. Purpose and Timing

• The Co-Op was executed on April 9, but its terms did not become effective until the 1O Notes issue date, which per the Complaint occurred on or about June 12, 2025 (the “Effective Date”).
• The Co-Op applies to the Co-Op Parties in their capacity as holders of “1O Initial Notes,” which refers to the 1O Notes issued to the participants in the June 12 private exchange transaction. 1O Initial Notes held by the Co-Op Parties on the Effective Date are referred to as the “Subject Instruments.”
• Accordingly, the Co-Op did not facilitate the original June 12 share pledge enforcement in the Dutch court. Instead, it operates as a second-phase offensive coordination tool that allows the Subject Instruments to receive exclusive benefits in a subsequent transaction at the expense of non-Co-Op holders of 1O Notes.
• According to the Complaint, the Co-Op executed on April 9 supplanted an existing cooperation agreement previously executed by the group in December 2024 (the “Initial Cooperation Agreement”). The Complaint does not appear to challenge the Initial Cooperation Agreement on antitrust grounds.

2. Lockup and Support Provisions

• The Co-Op Agreement includes broad lockup provisions. Co-Op Parties agree not to entertain or engage in any “Covered Transactions” unless such transactions are offered pro rata and on equal terms to all Co-Op Parties, which are defined as “Approved Transactions.”
  
• Co-Op Parties are also required to support any company-proposed Approved Transaction that meets certain specified conditions, including that the proposed transaction does not offer “any advantageous treatment to any 1O Notes that are not Subject Instruments.”

• Section 10(B) also provides that Co-Op Parties agree not to support any Covered Transaction that does not meet the criteria shown immediately above.
• Taken together, Sections 8-10 pre-commit the Co-Op Parties to support any Approved Transaction proposed by Selecta that meets the specified criteria while barring them from supporting transactions that do not. Any transaction that offers “advantageous treatment” to non-Co-Op 1O Notes is effectively off the table.

3. Transfer Restrictions

• The Co-Op’s transfer restrictions limit assignments of Subject Instruments to existing Co-Op Parties or, if the transferee is not already a Co-Op Party, require that it join the Co-Op. There is an exception for interim assignments to qualified market makers where the ultimate assignee is a permitted assignee.
• Assignments that violate the transfer restrictions are void ab initio.

4. Duration and Termination

• The Co-Op automatically terminates upon “expiry of the 12M Reduced Thresholds,” defined by reference to a term sheet between the Co-Op Parties and the Selecta Group.
• This reference period appears to correspond to a “12M Reduced Threshold Period,” which, according to the Complaint, is a defined term in the Exchange Memorandum referring to the 12-month period from the Effective Date during which (i) certain sacred rights under the 1O Notes can be amended by majority consent and (ii) the “payment for consent” provision thereunder does not apply.
• According to the Complaint, citing the Bidco Exchange Offer Memorandum dated June 17, 2025 (attached to the Complaint as Exhibit B), the 12M Reduced Threshold Period (and the effective duration of the Co-Op) is the window during which the 1O Notes indenture would allow a subsequent non-pro-rata transaction for the benefit of the Co-Op Parties at the expense of the non-Co-Op 1O Notes.