Discussion Preview

The phrase “creditor-on-creditor violence” has become widely discussed in recent years – even though different groups of creditors have always had competing interests in scenarios of financial distress. That’s partly because looser terms in finance documents in many of the world’s key financial markets have given strong borrowers – such as financial sponsors – more flexibility in prioritising certain groups of creditors over others. This term is most closely linked with liability management exercises (or transactions: “LMEs” or “LMTs”), which is a bond market term that’s gained currency in the loan markets recently. So where and how do consent solicitation processes fit within this landscape?

Consent solicitations have been a standard – and crucial – part of the bond market for decades. Like waivers and amendments for loans, they allow a company and its creditors to change the terms of their arrangements ahead of maturity when circumstances change. And again much like loans, there are different levels of consent required for different prospective changes. Debates about “sacred rights” reflect similar discussions all or unanimous lender consent versus majority consent in the loans world. But what’s changed in recent times has been some borrowers’ willingness to use increasingly coercive “sticks” to incentivise consent to a proposed change by disadvantaging non-consenting lenders in the resulting capital stack.

In this webinar we’ll discuss how consent solicitations are used around the world: first in bonds, and now increasingly in loans as widely-held syndicated loans start to look more like bond-style instruments. We’ll show how famous cases from recent years – such as Serta Simmons in the US – have spawned copycat manoeuvres elsewhere… and how creditors have responded (at the time and when originating financings). We’ll distinguish these scenarios from other examples of LMEs, like dropdown transactions – and talk about the role of litigation in creditor responses to aggressive structures. And we’ll discuss how and why the South African might – or might not? – see similar transactions in the years ahead given its differences with other markets elsewhere.

SPONSORS

SARIPA sincerely thanks Metis Strategic Advisors for their support of this event.