A disqualified list, aimed at the lawyers

Most of what a credit agreement restricts is the borrower. A disqualified counsel provision restricts the lenders, and at the timeline of a deal when freedom to choose is most dear.

Vitamin Well, backed by Cinven and Bridgepoint, launched a cross-currency term loan last month to fund its acquisition of EMPWR Nutrition - US$1bn, EUR890m and SEK1.55bn, priced at 350bp at the tight end of talk, with OID at 99 and 99.5. 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.

‍Two kinds of DQ

A disqualified lender list restricts who can hold the debt. The borrower names institutions - competitors, and increasingly the distressed funds most likely to organize against it - and the agent blocks their trades before settlement. That's a restriction on the identity of the creditor.

A disqualified counsel list restricts who the lenders can instruct once they hold it. The borrower names law firms - in practice the restructuring specialists who build ad hoc groups and run the creditor side of a liability management defense - and the lenders can't retain them if the credit deteriorates. That isn't a limit on borrower capacity at all. It operates on creditor group formation.

Baskets, incremental capacity, transfer restrictions and the LME blockers of the past two years all describe what the borrower can and can't do to its creditors. A disqualified counsel provision restricts who the creditors can hire when they organize.

A group that can't hire the firms who know the playbook is a weaker group before a single term is negotiated in a workout.

‍The pricing shows where the line was

The economics went the borrower's way - 350bp at the tight end, OID 99 and 99.5. On the documents, two things went the other way: the disqualified counsel provision came out, and high watermarking, a separate borrower-friendly feature, was removed in the same syndication. Lenders paid up on spread and held firm on the machinery they'd need if the credit turned. The concession they refused wasn't about yield. It was about their ability to act as an organized creditor later.

‍The open question

Whether a provision limiting a lender's choice of counsel is enforceable hasn't been tested. In the US the concept has gained some traction in broadly syndicated deals since late 2025 and been rejected in most private credit ones, a divergence that's a story of its own. Vitamin Well is the first European data point, and the answer syndication gave was no.

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