The signs for the leveraged finance market in 2011 are mixed. Questions remain as to whether this year will see a fresh spate of restructurings and/or continued growth in primary issuance. Whilst data compiled by Fitch Ratings has shown that European PE backed company default rates slowed in 2010 (and premier league spending during the January transfer window topped £225 million compared with £30 million last year), the primary leveraged finance market has started slowly this year.

Release provisions

The scope of the powers afforded to the security agent by the so called “release provisions” found in many intercreditor agreements employed in LBO deals has come under scrutiny recently. A number of restructurings have relied upon using the security agent’s powers to implement a restructuring and many others will have at least considered using them.

As markets react to the Coronavirus Disease 2019 (COVID-19) pandemic, the trading prices of loans and notes have declined. In light of these developments, borrowers and their affiliates, including private equity sponsors, are considering whether to buy back outstanding debt at a discount. In analyzing the potential benefits and drawbacks of pursuing debt repurchases, borrowers and private equity sponsors should consider the following:

Outstanding Debt Documents

Release provisions

The scope of the powers afforded to the security agent by the so called “release provisions” found in many intercreditor agreements employed in LBO deals has come under scrutiny recently. A number of restructurings have relied upon using the security agent’s powers to implement a restructuring and many others will have at least considered using them.