Our Legal Insights Blog

For most of the last ten years, lenders have been losing the documentation battle one provision at a time.‍Debt capacity got bigger. Investment baskets got looser. EBITDA definitions got longer. Maintenance covenants disappeared. Liability management exercises then showed everyone what could actually happen when all of that flexibility was used together.‍The recent Thoma Bravo negotiations around Proofpoint tell a very different story.

Stanley Druckenmiller says he writes everything with AI now. The debate that followed was about op-eds. The harder version of it is about analytical work - and it's the question we're answering in the design of the Covenant Workbench.

Aston Martin Lagonda's July 22nd announcement of its £550m financing from funds managed by HPS Investment Partners described the security in one sentence: the Financing is "secured against certain of the Group's assets situated in a newly incorporated subsidiary, together with certain other assets of the Group." It didn't name the subsidiary, didn't list the assets, and didn't mention intellectual property.

The Arc of the Covenant podcast is now live, and the first three episodes are out on Apple Podcasts and Spotify. The show follows one thread - the promise between borrowers and lenders, and what's become of it. Each conversation looks at that promise from a different perspective, because the same set of documents reads differently depending on where you are when you open it.

Earlier this month, S&P cut Aston Martin's senior secured notes to CCC, revising the recovery rating on the notes from 3 to 5. That revision halves S&P's recovery estimate, from 50% to 25%, and the stated basis tracks back to what this situation has been teaching on the covenants since July: the new £550m financing ranks ahead of the notes in the recovery waterfall at the point of hypothetical default, diluting recovery prospects for existing holders.

Vitamin Well, backed by Cinven and Bridgepoint, launched a cross-currency term loan this month. IFR reported on July 23rd that the borrower had proposed a disqualified counsel provision in the term loan, and that lenders pushed back hard enough that it came out before allocation. It's described as the first attempt at the term in Europe, about a year after it appeared in US broadly syndicated deals.

On July 22nd, Aston Martin raised £450m of new senior secured debt from funds managed by HPS. A noteholder group holding more than half of the roughly $1.8bn-equivalent of notes had previously organized under a cooperation agreement, advised by Akin Gump. Then, on July 21st, a bondholder letter sent through Quinn Emanuel demanded the company stop the transaction within 48 hours; the company announced the financing as closed the next day.

Victoria plc has been refinancing its €166.6 million 3.75% senior secured notes due March 2028. Three announcements between July 8th and 23rd changed what a holder who refused it would receive.