Lenders’ Guide to Priming Exploitation

April 4, 2023

For the past several years, we have seen an increase in liquidity and liability management transactions that have stretched credit documentation and attracted significant litigation. Whether it’s sponsors and companies looking to preserve their ownership interests, or investors looking to leverage a temporary crisis to improve their loan position, these transactions have attracted substantial attention and scrutiny in the courts and the market. A cross-disciplinary team of finance, restructuring, and litigation attorneys at O’Melveny have been following this trend closely and have to put together a Priming Transaction Tracker to continue monitoring new developments. We also highlight below the numerous articles and alerts we have published on this topic, which will continue to be updated as new deals get announced, new lawsuits get filed, market practices evolve, and new judicial decisions clarify this fluid area of the law.

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Prior Client Alerts:

Deal Tracker:

 Deal  Provision at Issue Status
 Murray Energy
  • Open market purchase provisions
  • Subordination of liens sacred right
 Lawsuit dismissed
 Boardriders
  • Open market purchase provisions
  • Subordination of liens sacred right
 Pending; certain claims survived motion to dismiss
 Serta
  • Open market purchase provisions
  • Subordination of liens sacred right
 Pending; certain claims survived motion to dismiss
 TPC Group
  • Subordination of liens sacred right
  • Pro rata provisions
 Bankruptcy court ruled against minority lenders
 Incora
  • Voter dilution
  • Subordination of liens sacred right
 Pending
 TriMark
  • Open market purchase provisions
  • Subordination of liens sacred right
 Settled after certain claims survived motion to dismiss
 J. Crew
  • Investment negative covenants
  • Unrestricted Subsidiaries
 Settled after J. Crew sought declaratory judgment that proposed transaction did not violate credit agreement
 PetSmart/Chewy 
  • Guarantor release provisions
  • Investment and restricted payment covenants
  • Unrestricted Subsidiaries
 Settled after PetSmart filed a lawsuit alleging Citibank failed to release collateral in accordance with the terms of the loan documents
 Neiman Marcus
  • Investment and restricted payment covenants
  • Unrestricted Subsidiaries
 Settled after lawsuit was filed
 Travelport
  • Investment negative covenants
  • Unrestricted Subsidiaries
 Settled after lawsuit was filed
 Cirque du Soleil
  • Investment and restricted payment covenants
  • Unrestricted Subsidiaries
 Not challenged
 Revlon
  • Investment covenants
  • Unrestricted Subsidiaries
  • Voter dilution
 Lawsuit dismissed

This memorandum is a summary for general information and discussion only and may be considered an advertisement for certain purposes. It is not a full analysis of the matters presented, may not be relied upon as legal advice, and does not purport to represent the views of our clients or the Firm. Daniel S. Shamah, an O’Melveny partner licensed to practice law in New York, Jennifer Taylor, an O’Melveny partner licensed to practice law in California, Adam J. Longenbach, an O’Melveny counsel licensed to practice law in New Jersey, New York, and Pennsylvania, Joseph Zujkowski, an O’Melveny partner licensed to practice law in New York and Jeff Norton, an O’Melveny partner licensed to practice law in New York, contributed to the content of this newsletter. The views expressed in this newsletter are the views of the authors except as otherwise noted.

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