Our Legal Insights Blog

You hold Senior Secured Notes in a European leveraged buyout. A holding company above the operating group has issued Senior Notes that fall due before yours. Despite being senior in multiple ways, you’re still subordinated…so the question is: What subordination do you have, and where should you be looking to find protection against it?

Could you lend more to a borrower if an insurer covered part of the credit risk? When Angela Chang started explaining the possibilities at our Covenant Exchange roundtable in Singapore, I had so many questions that I more or less hijacked the conversation. So I invited Angela and her Texel Asia colleague Jamie Stork to continue it on the Arc of the Covenant podcast.

Leslie's term loan - like so many in the broadly syndicated market - has no financial covenants. The restructuring clock is ticking anyway, and the term loan's own maturity isn't what set it.

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.