Crew You? Out of Court Restructurings Through Credit Agreement Baskets

September 20, 2017 - LSTA members have been politely discussing a very important trend in the loan market, i.e., the use of credit agreement baskets to facilitate restructurings in ways that may not have been contemplated by lenders.  Credit agreements and indentures often contain “baskets” for companies to undertake transactions, such as taking on new debt, so long as they satisfy the conditions and limitations of the basket.   These conditions can include such things as caps on the maximum amount of a given transaction and limitations on the sale or other divestiture of property.  Recently a number of companies in financial distress have sought to use the availability of baskets as a tool in out-of-court restructurings.  J. Crew, Cumulus, Norse Skog and Neiman Marcus, are some of the well- known examples of this trend.  Holders of pre- existing debt in many of these situations have objected to the use of the baskets arguing that the transactions go beyond what is permissible under the credit agreement basket.  

Next week, the LSTA is hosted a webcast discussion on this important trend. Our panel, including James Millar, a restructuring partner at Drinker Biddle, and Brendon Hayes, Managing Director at Milstein, will delve into the implications of this increasingly popular trend. LSTA members can register for this webinar (which will also provide 1.5 CLE credits to the lawyers among us) by clicking here.

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