InPost drops its anti-cooperation provision

Lenders saw success this week as InPost removed the anti-cooperation provision from its proposed bonds, a week after including it in the preliminary offering memorandum, but there’s still plenty of flexibility in the rest of the package.

The September 23rd draft would have disregarded notes held by creditors who were party to a cooperation agreement, or acting under one, when counting consents, waivers and trustee instructions. The definition was broad, covering similar arrangements relating to the group’s debt, securities or equity. The risk factor suggested that even informal communications between holders could be caught.

The issuer or any parent could choose to count those votes. In other words, whether cooperating creditors retained their voting rights was left to the company’s discretion.

There was also a separate provision restricting a holder and its affiliates to voting no more than 20% of the notes, with the excess treated as not outstanding. Again, the company could make exceptions for holders it chose. A net short confirmation also applied to amendment votes, rather than just default notices.

These provisions could materially affect a holder’s ability to block changes. A fund holding 35% would ordinarily be able to block a release of all or substantially all of the collateral requiring two-thirds consent. Under the voting cap, assuming the remaining holders were unaffected and voted in favor, it couldn’t.

The September 30th docs changes memo removes the restriction on cooperation agreements. It doesn’t mention the voting cap or the net short confirmation, so those may still be in the final terms.

Investors secured changes elsewhere too. Forward-looking synergies are capped at 30%, with a 24-month look-forward period. Fixed-basket debt will count in the leverage ratios, other than same-transaction drawings, and high watermarking has been removed.

The ratio debt thresholds fall from 4x to 3.75x for senior secured debt, from 5.5x to 4.75x for junior secured debt, and from 7x to 5.75x for total debt. The builder basket is reduced to 50% of net income, subject to a 2x fixed charge coverage condition. The general restricted payments basket becomes a single lifetime amount. The Specified Asset Disposition construct is removed, and a J.Crew blocker is to be added, although the wording is still to come.

Those are meaningful improvements. Several important permissions, however, remain at their original leverage levels.

Portability still allows the first change of control without triggering the put if senior secured net leverage is below 4.5x, compared with marketed leverage of 3.4x. Unlimited investments, including investments in Unrestricted Subsidiaries, remain available at 4.5x.

The asset sale provisions also give the company considerable flex. Proceeds need only be offered to noteholders if they remain unused after 545 days. At senior secured net leverage of 3.75x or below, no offer is required. That is now the same threshold as the revised senior secured ratio debt test.

This is why I would read the changes memo alongside the original package. The list of concessions tells you what investors achieved. You still need to work through the permissions that remain.

Paramount Skydance’s financing for Warner Bros. Discovery, marketed the same week, raises a related question about the starting point for negotiations.

With $69.6 billion of pro forma secured debt and ratings of BB+, BB and Ba3, the company is offering an investment grade covenant package. There are restrictions on liens, larger asset sales and mergers, but no covenants restricting debt, dividends, investments or affiliate transactions.

The collateral and guarantees also release once two agencies rate a series investment grade on an unsecured basis. They do not return following a downgrade.

There is no debt or restricted payments basket to negotiate down where the covenant itself is absent. Investors have to decide whether they are comfortable with that freedom from the outset.

For InPost, I’ll be looking at the revised wording to see exactly how the removal has been implemented, whether the voting cap survives and what the J.Crew blocker actually protects. The changes memo improves the package but it doesn’t finish the review.

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