Archives: Intercreditor Issues

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Interest Rate Swaps: What to do When the Loan Agreement Terminates

Here's the story: A lender wants to refinance a loan made by another bank, and the other bank has provided an interest rate swap to the borrower. The problem is that the swap is "out of the money" -- meaning that, in this case, the borrower would owe the bank about $20 million if the swap were terminated today. Termination of the credit facility causes the swap to terminate too, so, unless we can come up with another option, this additional $20 million will be owed on the day the loan is refinanced. What can we do?… Continue Reading

Can We Credit Bid Or Not?

Credit bidding has become a really hot issue recently.   For those of us who don’t normally work on bankruptcy matters, the right to credit bid is an important right that secured lenders usually have in a bankruptcy proceeding.  If you’re the senior secured lender and you want to buy the company’s assets in a bankruptcy sale, you can show up at the … Continue Reading

Second Liens Really are Second

With the increase in corporate bankruptcy filings over the past year, there have been some interesting bankruptcy court decisions that affect those of us on the front end in corporate lending. One recent case took up the question of whether a second lien is truly second -- and whether it is safe to expect the terms of your intercreditor agreement to be enforced.… Continue Reading

What if an Equity Sponsor is also a Lender in your Bank Group?

In today's challenging economic climate, private equity sponsors are trying to figure out how to fill funding gaps in acquisition financings -- and how to provide additional capital to their troubled portfolio companies. In lieu of providing additional equity, some sponsors are requesting the ability to participate as a lender in the senior debt facilities of the portfolio company. If the lenders decide to allow the sponsor to become a lender in their debt facilities, what steps should they take to best protect themselves, given the different hats this new lender will be wearing?… Continue Reading
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