September 24, 2024 - The LSTA, the trade association for the corporate loan market, today released representative liability management transaction (“LMT”) protections for credit agreements in private corporate credit.

LMTs have become more prevalent this year across the corporate loan market. LMTs – and the credit agreement provisions that enable them – have come into particular focus in private corporate credit. Although past LMTs may have been permitted under relevant credit agreements, the increased complexity of credit agreements and the bespoke nature of transactions in this space can make it challenging for lenders to identify the provisions that enable LMTs. This document can serve as a reference point for market participants in their credit agreement negotiations.

Drafted with a non-lawyer in mind, the chart identifies each of the LMT types that the market has seen to date – Serta, J.Crew, Pluralsight, Envision, At Home, and Chewy as they are referred to colloquially. For each of those LMT types, we have presented the harm presented and the associated structural considerations. In addition, a “best practice” approach to credit agreements is offered. As the document makes clear, private corporate credit is assorted. This document does not intend to suggest a one-size-fits all approach to these transactions but instead can serve as a guidepost.

Tess Virmani, executive vice president and head of policy at the LSTA, said, “What we have done here is offer the best practice for LMT protections which can serve as a reference point in member negotiations. There are numerous and often interdependent variables at play within the transaction documents as a whole, in addition to borrower-specific considerations. How parties decide to reflect those negotiations in credit agreements is their prerogative and outside the scope of this list.”

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Media Contact:

Profile for the LSTA, Rich Myers LSTA@profileadvisors.com