Shearman & Sterling LLP
Issue link: https://digital.shearman.com/i/1494420
Uptiering Transactions – Review and Drafting Recommendations Pro Rata Sharing Provisions • Make sure all pro rata provisions are sacred rights – pro rata sharing, pro rata treatment of payments, and/or waterfall; • Limit exceptions to the pro rata provisions; • Check if the pro rata provisions affect all lenders, or only lenders within a class (thereby permitting the borrower to create a new class and offer the new class non- pro rata treatment); • The pro rata sharing provisions should capture amendments having the effect of releasing all or substantially all collateral or guarantees. 40 Debt Exchange Provisions • Does the credit agreement permit "Dutch auctions", and how is it defined? Does the credit agreement permit "open market purchases", and if so, what definitions or restrictions apply? • Include explicit restrictions on open market purchases with multiple lenders or a cash consideration requirement; • Require unanimous vote for amendments to the debt exchange provisions; • For bonds, include a Payment for Consent covenant, which requires issuer to offer same consideration to all noteholders for a consent solicitation. Voting Thresholds • Does the debt document require unanimous vote for a claim subordination? • Does the debt document require unanimous vote for a lien subordination? • Even if the above protections are present, make sure amendments to them require unanimous vote of all affected lenders; • Require pro rata sharing provisions require unanimous vote of all affected lenders. • Consider what ability there is to "rig the vote" in favour of the borrower/issuer. Liability Management and Refinancing Solutions in Europe