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Lenders Seek to Avoid Creditor Violence

As U.S. businesses face ongoing economic headwinds, commercial lenders are acting more aggressively to reduce their exposure to rogue actions by co-lenders. In a number of transactions over the last several years, lenders have broken with their lending syndicates to cut self-serving restructuring deals with struggling companies at the expense of the rest of their fellow lenders. To prevent this “creditor-on-creditor violence,” lenders are increasingly entering into cooperation agreements earlier in the financial restructuring process—seeking to create a unified front among their lender groups at the first signs of borrower distress. Lenders believe these proactive efforts will reduce the risk of rogue actions by a subset of their lending syndicate and prevent the value-destructive disputes that they generate.

“Creditor-on-creditor violence” is on the rise. How are lenders attempting to navigate distress and avoid disputes? Tim Carter, Pam MacKenzie, and Jim Wallack discuss the growing use of cooperation agreements in The Wall Street Journal. 

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When a borrower faces financial difficulty, whether arising from macro trends such as today’s interest rate environment or company-specific challenges such as a class action lawsuit or supply chain issues, the different objectives among a lending group can turn members of the syndicate against each other.


corporate, bankruptcy & restructuring, banking & finance, article, commercial real estate workouts