Liability Management Transactions

Summary

This practice note explores current developments in uptier or liability management transactions (LMTs). LMTs are a controversial breed of funded debt transaction, the essence of which is to allow a borrower to evade certain secured lenders' sacred rights provisions and create a higher tier of new, supersenior secured debt funded through a combination of new money and rollups or exchanges of old debt held by favored parties. Note the market has not settled on a term for the transaction, and even as this practice note was being written, a new moniker emerged: position enhancement transaction or PET.