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Liability Management Exercises: Drop-Down Financings and Uptiering Transactions, What is a Lender to Do?

Recording of a 90-minute premium CLE video webinar with Q&A

This program is included with the Strafford CLE Pass. Click for more information.
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Conducted on Thursday, May 20, 2021

Recorded event now available

or call 1-800-926-7926

This CLE course will discuss liability management transactions currently being employed in the syndicated loan market, including "drop-down" and "uptiering" structures and how lenders might respond to these financing maneuvers. The panel will focus on liability management exercise issues highlighted in recent cases and elements of credit agreement covenants that a lender needs to consider in order to address these transactions.


Liability management exercises have become more commonplace during the past 12 months, and typically take the form of either drop-down financings or uptiering transactions. Both types of transactions involve complex structuring techniques that provide additional avenues of leverage for borrowers but can negatively affect the expectations and rights of existing lenders.

In a typical drop-down structure, the borrower forms and transfers assets to a subsidiary, allowing the subsidiary to incur new debt secured by the contributed assets. This alters the lien position of existing lenders who may have assumed they had first priority claim to assets that have now been transferred to the subsidiary.

In the uptiering transaction structure, the borrower incurs new debt provided by a group of lenders. The existing debt of the participating lenders is exchanged for a pari passu super-priority or second priority position. The result is that nonparticipating lenders are subordinated to two tranches of debt.

Lead and participating lenders should carefully review loan documents to assess borrowers' ability to enter into subsequent liability management transactions. From the lenders' standpoint, the subordination of claims should be a "sacred right," and pro-rata sharing provisions should include transactions that would have the effect of impacting pro-rata sharing.

Listen as our authoritative panel discusses drop-down and uptiering transaction structures and how lenders should respond to these financing maneuvers.



  1. Emergence of liability management in the current syndicated loan market
  2. Drop-down financing
  3. Uptiering transactions
  4. Subordination issues and intercreditor relationships
  5. Documentation considerations: limitations on investments, unrestricted subsidiaries, waterfall, pro rata provisions, and "sacred rights"


The panel will review these and other key issues:

  • How does drop-down financing impact the collateral position of existing lenders?
  • Are there circumstances in which an uptiering transaction might be beneficial to nonparticipating lenders?
  • When is an intercreditor agreement needed in connection with a liability management transaction? What are the key terms?
  • What "sacred rights" provisions would limit the borrower's ability to engage in liability management transactions?


Manzer, Alison
Dr. Alison R. Manzer

Cassels Brock & Blackwell

Ms. Manzer is a member of the Firm's Financial Services Group. Her practice encompasses a broad range of commercial...  |  Read More

Mason, Valerie
Valerie S. Mason


Ms. Mason is a member of the Banking and Finance department and specializes in the representation of domestic and...  |  Read More

Morse, David
David W. Morse


Mr. Morse represents banks, private debt funds, commercial finance companies and other institutional lenders in...  |  Read More

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