Pre-Chapter 11 Priming Transactions: Creating Liquidity, Delaying Maturities, Removing Covenants

Liability Management Transaction Structures and Vulnerabilities in or out of Bankruptcy

An encore presentation featuring live Q&A

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

This program is included with the Strafford CLE Pass. Click for more information.
This program is included with the Strafford All-Access Pass. Click for more information.

Conducted on Tuesday, August 2, 2022

Recorded event now available

or call 1-800-926-7926

This CLE course will discuss strategies that borrowers are increasingly using to create liquidity, delay maturities, and relieve covenant pressure to prevent bankruptcy while also allowing certain creditors to maintain control and preferred priority if bankruptcy ensues. The program will discuss how these transactions work; how they compare with post-petition financing, roll-ups, and priming; their vulnerabilities in bankruptcy; and how different constituencies can respond.

Description

To address both liquidity and cash issues, Debtors, together with cooperative creditors, are more frequently using transactions usually seen in post-petition DIP financing, such as roll-ups or roll-overs and priming liens, in the pre-bankruptcy period to secure cash and/or liquidity as well as to obtain relief from maturity dates, covenants.

In “drop-down” transactions, the borrower transfers assets to new subsidiaries, which then borrows against them, putting them beyond lenders who had assumed those assets secured their liens. In “uptiering” transactions, existing lenders “roll-up” their existing debt to a super-priority senior position ensuring they are in control of future restructuring in or out of bankruptcy. Financings for Revlon, Tri Mark, J.Crew, Travelport, Neiman Marcus, and PetSmart, are some examples of these priming transactions.

Understanding how these transactions work, what steps those creditors excluded from these leaps in priority can consider, how these transactions fare in bankruptcy, and remedies for creditors are critical for both bankruptcy and finance attorneys.

Listen as this renowned panel guides counsel through how these historically Chapter 11 transactions are being used in pre-Chapter 11 scenarios, the challenges they face, and how they fare in bankruptcy.

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Outline

  1. Rise of liability management transactions
  2. Drop-down financing
  3. Uptiering transactions
  4. Relevant cases
  5. Impact on reorganization and confirmation

Benefits

The panel will review these and other key issues:

  • How do pre-filing uptiering and drop-down transactions affect Chapter 11?
  • Are liability management transactions vulnerable to fraudulent transfer claims?
  • Are liability management transactions only relevant in participation?
  • Could a Chapter 11 plan release claims between creditors?

This is an encore presentation with live Q&A.

Faculty

Norton, Jeff
Jeff L. Norton

Partner
O'Melveny & Myers

Mr. Norton, a member of the firm's global finance practice, focuses on corporate finance matters, with particular...  |  Read More

Pak, Sung
Sung Pak

Partner
O'Melveny & Myers

Mr. Pak, Chair of O’Melveny’s Corporate Finance Group, handles leveraged finance matters, focusing on...  |  Read More

Shamah, Daniel
Daniel S. Shamah

Partner
O'Melveny & Myers

Mr. Shamah is a premier restructuring lawyer who is universally lauded by peers and clients for his expertise in...  |  Read More

Taylor, Jennifer
Jennifer Taylor

Partner
O'Melveny & Myers

Ms. Taylor is a partner in O’Melveny’s corporate finance and restructuring practice groups. She is also a...  |  Read More

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