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Abstract: 

In response to the increased frequency of majority-backed debt restructuring transactions that have significantly disadvantaged minority debtholders, lenders in the syndicated loan market have increasingly turned to cooperation agreements among themselves as a means to mitigate the risk of exclusion from such deals. While often effective, this approach has been met with hostility from the sponsor community, and may inhibit a lender’s ability to freely manage and trade its loan position. In this article the author describes the elements of a typical cooperation agreement, considers some of its advantages and disadvantages, and discusses sponsors’ evolving response to these arrangements.

Keywords: Liability Management Transactions and “Lender-On-Lender Violence”; Cooperation Agreements; Transfer Restrictions; Loan Trading

Affiliations:  1: Crowell & Moring LLP.