September 24, 2024 - Today the LSTA has published the “Private Corporate Credit – Representative Liability Management Transaction Protections for Credit Agreements” chart. The LSTA developed this new private corporate credit tool in consultation with 14 member institutions from the LSTA’s Private Credit Markets Committee. Click here for the press release.

In light of recent events and the growing complexity of credit agreements, we have developed this chart to highlight the key features of the different types of liability management transactions (“LMTs”) prevalent in the market. The chart then matches each structure with representative market formulations or conditions to help lenders identify ways to protect themselves. The issues have been broken out according to the LMT giving rise to the colloquial term used in the market to describe it, e.g., “J. Crew” (the ability of an unrestricted subsidiary to own Material IP). A summary of broad drafting considerations follows, summarizing the overarching structural points parties may want to address over the course of the drafting and deal process. The protections identified in the chart are intended to represent “best practice” with respect to the relevant LMT loophole. Importantly, the document notes that the protections identified are not meant to offer a one-size-fits-all approach to drafting these structural safeguards. Private corporate credit is assorted – borrower size, deal size, and deal structure can vary significantly across industries and sectors. These characteristics and the negotiation of the deal itself will impact the protections, if any, parties agree to. Our goal here is to simply offer a resource for members to consider in these negotiations. For further drafting guidance, please refer to the LSTA’s “Liability Management Transactions: Drafting Fixes” advisory, which was last published in December 2023.

For further information, please contact tvirmani@lsta.org or eyazgi@lsta.org.