Market Alert: Anti-Cooperation Language Debuts in the US BSL Market

Ian Feng, J.D. - Senior Covenant Analyst, Covenant Review

EXECUTIVE SUMMARY

Cooperation agreements (also known colloquially as 鈥渓oyalty pacts鈥 or simply 鈥渃o-ops鈥) have over the last few years become a popular creditor-side maneuver in liability management transactions (LMTs). Generally speaking, cooperation agreements are intended to establish a unified bloc of creditors (both lenders and bondholders), which are then better positioned to defend against aggressive LMTs, particularly priming transactions (or any other LMT where some level of creditor consent is needed). While in theory dampening 鈥渃reditor-on-creditor鈥 tendencies, such agreements can also have the opposite effect of emboldening certain parties to engage in a more 鈥渞ough and tumble鈥 negotiations. This is especially true in the United States, where 鈥渢iered co-ops鈥 have become a regular way occurrence, with different groups of
creditors party to the co-ops benefitting from different economics

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