Uptier Transactions After Serta and Mitel: Validity of Liability Management Exercises, Drafting Considerations
Course Details
- smart_display Format
On-Demand
- signal_cellular_alt Difficulty Level
Intermediate
- work Practice Area
Banking and Finance
- event Date
Thursday, March 6, 2025
- schedule Time
1:00 p.m. ET./10:00 a.m. PT
- timer Program Length
90 minutes
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This 90-minute webinar is eligible in most states for 1.5 CLE credits.
This CLE webinar will review two recent court decisions in In re Serta Simmons Bedding L.L.C. (Serta) and Ocean Trails CLO VII v. MLN Topco Ltd. (Mitel) and their potential implications for uptier transactions and liability management exercises. The panel will also provide drafting and structuring considerations and protections for borrowers and lenders contemplating liability management or uptier transactions under the current legal landscape.
Mr. Wender represents bank and non-bank lenders in structuring, negotiating and documenting multi-faceted secured and unsecured loan transactions across industries. His experience extends to traditional corporate financing/refinancing, acquisition financing, intercreditor and inter-lender agreements and restructurings. Mr. Wender’s practice also includes representing a broad range of clients in complex bankruptcy cases, out-of-court workouts, debt restructurings, asset dispositions and claims reconciliation procedures. He represents purchasers, sellers and other parties in bankruptcy Section 363 sales, debtors in possession, secured and unsecured creditors and creditor’s committees.
Mr. Zajac is active in the firm’s leveraged lending, alternative capital, and financial restructuring practices, where he brings a unique blend of traditional finance and restructuring experience to advance and protect the interests of clients. He represents financial institutions, investment funds, lenders, and borrowers in leveraged finance, acquisition financings, first and second lien financings, syndicated credit facilities, and debtor-in-possession financings. Mr. Zajac's restructuring experience includes representing secured creditors, DIP lenders, and acquirers of distressed businesses.
Mr. Clarkson-Maciel serves as part of the Banking & Specialty Finance and Restructuring & Insolvency Groups at the firm, and is a member of the Liability Management & Special Situations team. He advises across the debt spectrum, from complex event-driven transactions, including liability management, special situations, restructurings, and other hybrid capital or distressed credit opportunities to Canadian counsel on cross border financings involving Canadian subsidiaries. His work spans matters featuring both private debt and high-yield bonds. Mr. Clarkson-Maciel has been involved in several market-leading European and Canadian deals involving lending, liability management exercises, lender-on-lender violence, distressed private credit, restructuring plans, and pure-play wind-down bankruptcies. His work often involves cross-border and multi-jurisdictional elements and is instructed by clients and lead counsel representing clients across the whole stakeholder spectrum, including distressed companies, special situations lenders, distressed debt investors, and insolvency practitioners.
On Dec. 31, 2024, the Fifth Circuit issued its highly anticipated decision in the Serta case, addressing the contractual viability of uptier transactions and the enforceability of related indemnities in bankruptcy plans. The central issue in Serta was whether the uptier transaction violated the existing first-lien and second-lien credit agreements' pro rata sharing provisions. The court held that the transaction did not constitute an "open market purchase" under Serta's existing credit agreements and therefore violated those credit agreements' pro rata sharing provisions.
In a contrasting opinion regarding a similarly structured uptier transaction as that in Serta but with distinguishing facts, the New York Supreme Court's First Appellate Division held in Mitel that unlike Serta, the applicable credit agreement did not limit Mitel's ability to repurchase loans on a non-pro rata basis to Dutch auctions and open market purchases. The Mitel court also determined that the debt exchange did not violate the "sacred rights" of the non-participating lenders because the debt exchange was not an agreement to waive, amend, or modify the Mitel credit agreement.
Serta and Mitel highlight the importance of contract language in credit agreements and their holdings have the potential to significantly impact borrowers and lenders that have executed or are contemplating liability management exercises.
Listen as our authoritative panel explores the potential implications of the Serta and Mitel decisions on liability management exercises and provides suggestions for structuring and drafting uptier transactions going forward.
- Overview: contractual viability of uptier transactions
- Serta decision
- Mitel decision
- Implications of these cases and others on borrowers and lenders and the continued validity of uptier transactions and liability management exercises
- Key distinctions between Serta and Mitel
- Structuring and drafting considerations in light of these decisions
- Key takeaways and practitioner pointers
The panel will address these and other key considerations:
- What is the background, procedural history, and ruling in the Serta case?
- What is the significance of the Mitel case and how does this ruling differ from the Serta decision?
- What are the possible implications for borrowers and lenders contemplating uptier transactions or liability management exercises in light of these decisions?
- What are some key drafting and structuring considerations for credit facilities under the current legal landscape?
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