Bankruptcy Ruling Bolsters Uptier Transactions Challenges

James Newton, Geoffrey Peck, and Darren Smolarski authored an article for Law360 discussing the New York Supreme Court decision in ICG Global Loan Fund 1 DAC v. Boardriders Inc. on a Boardriders uptier transaction, which provides insight in the developing patchwork of federal and state court decisions trailing these transactions.

“All signs point to uptier transactions continuing to be seriously considered by liquidity-constrained borrowers with few other options to raise money,” the authors wrote. “The potential for a money judgment is unlikely to dissuade a borrower that is already facing the imminent prospect of a bankruptcy filing absent the new liquidity provided by the uptier transaction. Likewise, lenders with covenant-lite loans and the prospect of ending up as disadvantaged, subordinated lenders, will have an incentive to be part of the group engaging in the uptier transactions. Given these dynamics, uptier transactions are not likely to subside in the near term.”

Read the full article.