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The Ramifications of Covenant-Lite Structures


Level: Advanced
Runtime: 55 minutes
Recorded Date: April 11, 2019
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Agenda


  • Leveraged Loan Credit Agreement/High-Yield Bond Indenture Basics
  • History and Overview of Covenant-Lite Structures
  • Recent Collateral Leakage Transactions
  • Litigation Responses
  • Other Considerations
  • What Comes Next?
Runtime: 55 minutes
Recorded: April 11, 2019

Description

Borrowers have been using relaxed credit agreement and bond covenants to “strip” assets from the collateral/asset pools that lenders think secure them. Neiman Marcus, J.Crew, PetSmart and BC Partners are recent examples. By focusing on these examples, this panel will discuss the covenant-lite structure of today, what the documents really say, who benefits and who gets hurt, and who influences the structure and outcome.

This program was recorded as part of ABI's Annual Spring Meeting 2019 on April 11th, 2019.

Provided By

American Bankruptcy Institute
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Panelists

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John Greene

Opportunistic Credit Portfolio Manager
Bardin Hill Investment Partners LP

John Greene is a Portfolio Manager of Bardin Hill’s litigation finance and opportunistic credit strategies. Prior to joining the firm, Mr. Greene was a Distressed Securities Analyst for J.P. Morgan Chase, where he published research on distressed and high yield securities, made proprietary trading recommendations, and worked with J.P. Morgan Chase's London-based European high yield research team. Mr. Greene received a B.A. from Franklin & Marshall College.

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Sarah R. Borders

Partner
King & Spalding LLP

Sarah Borders is a nationally recognized restructuring and finance lawyer. Her practice focuses on developing, structuring, documenting and closing financing transactions, representing borrowers and lenders in debt restructurings, workouts and forbearance arrangements; and representing debtors, lenders purchasers and unsecured creditors in Chapter 11 reorganization cases. Sarah's practice spans a number of industries including infrastructure, real estate, energy, healthcare, manufacturing, retail, restaurant, hospitality and transportation.

Sarah represents lenders and borrowers in a variety of complex financing transactions that include term loans, revolving credit facilities, bridge loans, cmbs financing, securitizations, mezzanine financing, subordinated debt, preferred equity transactions, unitranche financings, and credit lease transactions. Clients call on her not only to negotiate and document financing transactions but also to develop and structure financial products. Sarah has particular expertise in structuring financing transactions for financially challenged borrowers.

Sarah is a native of Louisiana, graduated from Louisiana State University and the University of Virginia School of Law, where she serves on the Board of Trustees for the Law School Foundation. She is a former law clerk for the late Judge Henry A. Politz of the U.S. Fifth Circuit Court of Appeals.

Sarah is the Chair of the Firm's Lateral Partner Committee, has served multiple terms on the Firm's policy committee and had led both the Financial Restructuring and Real Estate practice groups. Advised MSN Healthcare on the sale of its distressed medical staffing business with locations in more than 30 states. The sale was completed out of court on a basis that preserved thousands of jobs, maximized value for the stakeholders and minimized transaction costs and risk to the owners and managers.

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Roger G. Schwartz

Partner
King & Spalding LLP

Roger G. Schwartz is a finance partner in the New York office of King & Spalding. He represents public and private companies, agents, lenders, strategic and financial buyers, and investors in a broad range of restructuring matters, including Chapter 11 cases, out-of-court restructurings, and bankruptcy-related acquisitions, sales and financings. He also advises equity sponsors, portfolio companies and directors in connection with liability management transactions and corporate governance issues in distressed and out-of-court situations and transactions.

Additionally, Mr. Schwartz has an active practice representing major financial institutions and other clients in bankruptcy and commercial litigation matters.

Prior to private practice, Mr. Schwartz was a senior counsel of workouts at General Electric Capital Corporation (GE Capital), where he provided legal oversight for a multibillion-dollar portfolio of GE Capital lending commitments. While at GE Capital, Schwartz also acted as a director of litigation where he directed legal strategy and case management for a diverse set of commercial litigation, compliance and regulatory matters.

Mr. Schwartz is a frequent lecturer, speaker and author on restructuring, bankruptcy and insolvency topics and he has served as Co-Chair, Advisory Board member, moderator and panelist for numerous American Bankruptcy Institute conferences.

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Jack F. Williams

Principal
Baker Tilly Virchow Krause, LLP

Questions? Jack Williams has over twenty-five years of experience in bankruptcy and financial distress-related matters and forensics and fraud investigations, providing consultation and expert witness services in the areas of business restructuring, bankruptcy and insolvency taxation (federal, state, and local), public finance, fiduciary duties and governance issues, D&O liability matters, related-party transactions, intercompany transfers, international asset concealments, fraud investigations and fraudulent transfers, remedies, forensic accounting and investigatory services, and commercial and IP damages modeling.

As a tenured Professor at Georgia State University College of Law and the Center for Middle East Studies in Atlanta, Georgia, Jack teaches and/or conducts research in the areas of business reorganizations, forensic accounting and financial investigations, mergers and acquisitions, corporate finance, taxation, and law and statistics. He is presently the Association of Insolvency & Restructuring Advisors’ Resident Scholar and has served two terms as the American Bankruptcy Institute (ABI) Resident Scholar. In these roles, he has researched a range of forensic investigation issues, fiduciary duties and governance issues, solvency and distressed business valuations, profit and profitability assessments, and international asset concealment schemes.

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Hon. Robert D. Drain

Judge
U.S. Bankruptcy, Southern District of New York

Hon. Robert D. Drain is a U.S. Bankruptcy Judge for the Southern District of New York in White Plains. Since his appointment, he has presided over such chapter 11 cases as Loral, RCN, Cornerstone, Refco, Allegiance Telecom, Delphi, Coudert Brothers, Frontier Airlines, Star Tribune, Reader’s Digest, A&P, Hostess Brands, Christian Brothers and Momentive. He also has presided over the ancillary or plenary cases of Corporacion Durango, Satellites Mexicanas, Parmalat S.p.A. and its affiliated U.S. debtors, Varig S.A., Yukos (II), SphinX, Galvex Steel, TBS Shipping, Excel Maritime, Nautilus, Landsbanki Islands, Roust and Ultrapetrol. He also has served as the court-appointed mediator in a number of chapter 11 cases, including New Page, Cengage, Quicksilver, LightSquared, Molycorp and Breitburn Energy.

Prior to his appointment to the bench in May 2002, Judge Drain was a partner in the bankruptcy department of Paul, Weiss, Rifkind, Wharton & Garrison, where he represented debtors, trustees, secured and unsecured creditors, official and unofficial creditors’ committees, and buyers of distressed businesses and distressed debt in chapter 11 cases, out-of-court restructurings and bankruptcy-related litigation. He was also actively involved in several transnational insolvency matters.

Judge Drain is a Fellow of the American College of Bankruptcy and a member and board member of ABI, a member of the International Insolvency Institute, a member and Secretary of the National Conference of Bankruptcy Judges and a founding member and chair of the Judicial Insolvency Network. He also is the current chair of the Bankruptcy Judges Advisory Group established through the Administrative Office of the U.S. Courts, and was appointed to the FDIC’s Systemic Resolution Advisory Committee through May 1, 2021.

Judge Drain was an adjunct professor for several years at St. John’s University School of Law’s LL.M. in Bankruptcy Program and currently is an adjunct professor at Pace University School of Law. He has lectured and written on numerous bankruptcy-related topics and is the author of the novel The Great Work in the United States of America. He received his B.A. cum laude from Yale University and his J.D. from Columbia University School of Law, where he was a Harlan Fiske Stone Scholar for three years.


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