Lender-on-lender violence: could US-style liability management techniques be applied in the European market?

Business restructuring partner Matthew Czyzyk, finance partners Aditya Khanna and Alex Robb, and business restructuring associate Natalie Raine and I recently authored an article in IFLR titled “Lender-on-lender violence: a European perspective”.

Lender-on-lender violence refers to a type of liability management transaction through which a company gives an advantage to a subset of creditors at the expense of another subset. These 'priming' deals enable the participating creditors, post-execution, to have some form of priority ranking relative to non-participating creditors. This best positions them for any potential upside, as well as reducing downside risk, in a turnaround scenario.

These transactions have become commonplace in the US market, but are yet to be widely used in Europe, where such deals are more challenging to execute due to differences in the market standards for documentary terms and the legal frameworks. However, as macroeconomic pressure continues to apply to credits through rising inflation, increasing interest rates, supply chain disruption and geopolitical instability, we expect to see an increase in the number of distressed European companies seeking more bespoke refinancing techniques.

Please reach out to me, Matthew, Alex, Aditya or Natalie, or any other member of the Ropes & Gray London business restructuring or finance teams if you would like to discuss any of the tools highlighted in the article.