Morrison Foerster’s MoFo Restructuring Round-Up provides our analysis of the statutory, regulatory, legal and business-related developments in the insolvency and restructuring world. Our goal is to provide timely, helpful, insightful and digestible content that will help you keep abreast of the trends that are shaping the industry.<h2>MORRISON FOERSTER’S BUSINESS RESTRUCTURING & INSOLVENCY GROUP</h2>We counsel clients around the globe on corporate distress. We advise debtors, creditors, creditors’ committees, ad hoc committees, secured lenders, and specialist investors and are confident in advising on significant multi-jurisdictional cases. The breadth of our practice allows us to find solutions for a broad range of participants in distressed markets and to help them find their way through their most complex issues. We are creative, pragmatic problem solvers and we know the restructuring world well.<h2>ABOUT MORRISON FOERSTER</h2>Morrison Foerster is a leading global law firm that transforms complexity into advantage for its clients. Our clients include some of the largest financial institutions, banks, consulting and accounting firms, and Fortune 100, technology, and life sciences companies. Highlighting the firm’s commitment to client service, leadership in market-changing deals and impact litigation, and values-based culture, Morrison Foerster has been repeatedly recognized as one of the top 10 firms on The American Lawyer’s A-List. Year after year, the firm receives significant recognition from Chambers and The Legal 500 across their various guides, including Global, USA, Asia‑Pacific, Europe, UK, Latin America, and FinTech Legal. Our lawyers passionately care about delivering legal excellence while living our values. Morrison Foerster has a long-standing commitment to creating a culture that respects and celebrates differences, while providing an inclusive environment. The firm has achieved Mansfield Certification Plus since 2018 as a result of successfully reaching at least 30 percent women, communities of color, and LGBTQ+ lawyer representation in a notable number of current leadership roles and committees. The firm also has a long history of commitment to the community and society through providing pro bono legal services, including litigating for civil rights and civil liberties, improving public education and fostering the wellbeing of children, advocating for veterans, promoting international human rights, enforcing the right to asylum, and safeguarding the environment.

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The Honorable James M. Peck retired from Morrison Foerster upon his appointment as an International Judge of the Singapore International Commercial Court in January 2024. While at Morrison Foerster, Judge Peck chaired Morrison Foerster’s Cross-Border Restructuring practice and also headed the firm’s Mediation practice. Before joining Morrison Foerster, Judge Peck served as a U.S. Bankruptcy Judge for the Southern District of New York from 2006 to 2014, where he presided over the chapter 11 and SIPA cases of Lehman Brothers and its affiliates and a number of other major chapter 11 and chapter 15 cases and wrote multiple legal decisions that have helped define the impact of safe harbors on qualified financial contracts.By invitation, Judge Peck is a fellow of the American College of Bankruptcy and a member of the Panel of Recognized International Market Experts in Finance. He is a past president of the International Insolvency Institute, served on the board of governors of the National Conference of Bankruptcy Judges, and was judicial chair of the American Bankruptcy Institute’s annual New York City Bankruptcy Conference. Former Judge Peck currently chairs the Business Bankruptcy Advisory Committee for the Southern District of New York.Judge Peck co-chaired the ABI’s Advisory Committee on the Safe Harbors. He is a member of the Advisory Committee of the Asian Business Law Institute, is listed as a qualified member of mediation panels maintained by INSOL International, the Singapore Mediation Center, and the Singapore International Mediation Center, and has been included on the Panel of Arbitrators for Financial Services Disputes of the Hong Kong International Arbitration Center and the Panel of Arbitrators of the Singapore International Arbitration Center.Judge Peck has been retained on a number of occasions to furnish expert witness statements for submission to the High Court in London regarding issues of New York law, comity, and the recognition of main and non-main insolvency proceedings. He is also a frequent speaker worldwide on insolvency issues and has participated as a keynote speaker and a panel chair around the globe in conferences presented by numerous international organizations and law schools. These include INSOL International, the International Bar Association, INSOL Europe, and the National Conference of Bankruptcy Judges. He has authored articles published in the American Bankruptcy Institute Journal and International Insolvency & Restructuring Report, and is an editor of a recently published book titled The Art of the Ad Hoc.Before his judicial appointment in the Southern District of New York, Judge Peck was in private practice for over 35 years, concentrating much of that time on bankruptcy law, business reorganization, and creditors’ rights.

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The Honorable James M. Peck is head of Morrison Foerster’s Cross-Border Restructuring practice. Before joining Morrison & Foerster, former Judge Peck served as a United States Bankruptcy Judge for the Southern District of New York from 2006 to 2014. During his judicial service, former Judge Peck presided over the chapter 11 and SIPA cases of Lehman Brothers and its affiliates and a number of other major chapter 11 and chapter 15 cases. As a judge, he has written multiple legal decisions that have helped to define the impact of the safe harbors on qualified financial contracts.

James Peck

Lorenzo is global co-chair of the firm wide Business Restructuring + Insolvency Group. Lorenzo represents debtors, creditors, and creditors’ committees in complex bankruptcy cases, workouts, and litigation. His cases have spanned the United States as well as countless industries, such as airline and cargo transportation, mortgage origination and servicing, retail, banking and finance, energy, oil and gas, and telecommunications.Lorenzo has represented the official committee of unsecured creditors in numerous recent chapter 11 cases, including Peer Street, Incora/Wesco, Clovis Oncology, Valaris, Windstream Holdings, Inc., Cloud Peak Energy, Westmoreland Coal Company, Inc., The NORDAM Group, Inc., Avaya Inc., Armstrong Energy, Inc., 21st Century Oncology Holdings, Inc., Peabody Energy, Inc., Energy Future Holdings, Corp., and UCI International, Inc.Lorenzo’s deep experience and capabilities advising on precedent-setting bankruptcy and restructuring matters have not gone unnoticed. He is listed as a leading lawyer in Chambers USA and has also been recommended by The Legal 500 US. He was also designated by Turnarounds & Workouts magazine as an Outstanding Restructuring Lawyer for his accomplishments in 2016 and 2017.

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Lorenzo is global co-chair of the firmwide Business Restructuring + Insolvency Group. Lorenzo represents debtors, creditors, and creditors’ committees in complex bankruptcy cases, workouts, and litigation. His cases have spanned the United States as well as countless industries, such as airline and cargo transportation, mortgage origination and servicing, retail, banking and finance, energy, oil and gas, and telecommunications.

Lorenzo is global co-chair of the firmwide Business Restructuring & Insolvency Group. Lorenzo represents debtors, creditors, and creditors’ committees in complex bankruptcy cases, workouts, and litigation. His cases have spanned the United States as well as countless industries, such as airline and cargo transportation, mortgage origination and servicing, retail, banking and finance, energy, oil and gas, and telecommunications.

Lorenzo Marinuzzi

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Whilst commonplace in the U.S., uptier transactions in which a borrower teams up with a subset of creditors to issue new “super priority” debt by amending or exchanging existing debt documents, have not been widely used in Europe.

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European Uptier Transactions: Six Things to Look Out For | MoFo Restructuring Round-Up

Whilst commonplace in the U.S., uptier transactions in which a borrower teams up with a subset of creditors to issue new “super priority” debt by amending or exchanging existing debt documents, have not been widely used in Europe. However, with increasing macro economic pressures and financial market instability, we may see more European borrowers taking advantage of flexibility in cov-lite debt documentation to implement liability management transactions as an alternative to, or even as part of, more formal restructurings. Differences in documentation, legal principles, and availability of other restructuring tools may mean liability management transactions might not occur in Europe in the same way as in the U.S. Here we set out some key things to look out for in European deals when considering uptier transactions. Intercreditor Arrangements<span class="embedded-entry redactor-component inline-entry" type="entry" data-sys-entry-uid="blt9287899135cba8a8" data-sys-entry-locale="en-us" data-sys-content-type-uid="image_content" sys-style-type="inline"><img class="dangerously-set-container__img-right" src="https://media2.mofo.com/v3/images/blt5775cc69c999c255/blt6fa70714cfbc3ec8/6525d4c857e2334b7246292b/231010-file-icon.jpg?format=auto&amp;quality=60" alt="File icon" data-reactroot="">Watch out for European intercreditor agreements which set out the ranking and priority of each creditor class and can be difficult to amend without each class consenting. This can create an impediment, although not insurmountable through use of a turnover arrangement. Some intercreditors can provide for super priority debt via a “hollow” (i.e., unutilized) tranche so amendments may not be required. Document Terms and Majorities<span class="embedded-entry redactor-component inline-entry" type="entry" data-sys-entry-uid="bltd58a8854b763234b" data-sys-entry-locale="en-us" data-sys-content-type-uid="image_content" sys-style-type="inline"><img class="dangerously-set-container__img-right" src="https://media2.mofo.com/v3/images/blt5775cc69c999c255/blt0e5ef79a39786bc9/6525d4c801a3378ccf5ea400/231010-checklist-icon.jpg?format=auto&amp;quality=60" alt="Checklist icon" data-reactroot="">There will need to be debt capacity in the debt documents or an ability to amend the same with majority consent. Some European credit agreements will incorporate indenture style covenants and allow this. In other credit agreements, permissions can be more tightly drafted and require greater majorities (such as 66 2/3% or more) to effect amendments.Debt Buy Backs<span class="embedded-entry redactor-component inline-entry" type="entry" data-sys-entry-uid="bltce02ffe98e1d29b8" data-sys-entry-locale="en-us" data-sys-content-type-uid="image_content" sys-style-type="inline"><img class="dangerously-set-container__img-right" src="https://media2.mofo.com/v3/images/blt5775cc69c999c255/bltc0c3ce4705bfb592/6525d4c8b8038ab45830c705/231010-money-icon.jpg?format=auto&amp;quality=60" alt="Money icon" data-reactroot="">Check whether the credit agreement allows the borrower to buy back debt from a subset of creditors. It is not uncommon to find restrictions that require the borrower to make open market purchases on a pro rata basis to ensure all creditors in the loan facility are treated equally. Exit Consents<span class="embedded-entry redactor-component inline-entry" type="entry" data-sys-entry-uid="bltf0fce322163cf684" data-sys-entry-locale="en-us" data-sys-content-type-uid="image_content" sys-style-type="inline"><img class="dangerously-set-container__img-right" src="https://media2.mofo.com/v3/images/blt5775cc69c999c255/bltcf09d23f4c84a349/6525d4c8fabb8d6771dc8070/231010-external-icon.jpg?format=auto&amp;quality=60" alt="External link icon" data-reactroot="">Exit consents can fall foul of English law. In one extreme case, an exit consent was considered an abuse of power by the majority on the minority, where the non-consenting minority recoveries were reduced to 0.00001% of their face value. An exit consent which does not impact recovery but removes other protections might be treated differently. Alternative Processes<span class="embedded-entry redactor-component inline-entry" type="entry" data-sys-entry-uid="blt6963eea09ffa4631" data-sys-entry-locale="en-us" data-sys-content-type-uid="image_content" sys-style-type="inline"><img class="dangerously-set-container__img-right" src="https://media2.mofo.com/v3/images/blt5775cc69c999c255/blt5c0dbdac35f44f4a/6525d4c8b4577d81425d1117/231010-arrows-icon.jpg?format=auto&amp;quality=60" alt="Arrows icon" data-reactroot="">The availability of other non-bankruptcy restructuring tools such as UK schemes of arrangement and restructuring plans, which have manageable voting thresholds, ability to cram down, flexibility to provide new money, and are less open to challenge once sanctioned, make them very attractive alternatives to liability management transactions. Bridge Financing<span class="embedded-entry redactor-component inline-entry" type="entry" data-sys-entry-uid="blt06d16b9f039934d4" data-sys-entry-locale="en-us" data-sys-content-type-uid="image_content" sys-style-type="inline"><img class="dangerously-set-container__img-right" src="https://media2.mofo.com/v3/images/blt5775cc69c999c255/blt0ee42de5f8258351/6525d4c8b4577d7e5b5d1119/231010-person-icon.jpg?format=auto&amp;quality=60" alt="Person icon" data-reactroot="">An uptier transaction could be used to provide much needed liquidity in anticipation of a full-scale restructuring. This bridge or “debtor-in-possession” style priority funding provided by an ad-hoc majority, can be less contentious when it leads to a wider financial restructuring that protects value for the creditors as a whole.

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