Odd Lots Inside the Blood Sport of Creditor-on-Creditor Violence
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Nov 25, 2024 Sujeet Indap, Wall Street Editor at the Financial Times and author of The Caesars Palace Coup, dives into the intense world of creditor-on-creditor violence. He reveals how the rise of 'cov-lite' loans has led to fierce competition among investors scrambling to recover their stakes from distressed companies. Indap discusses the legal battles increasing costs for big players, the crafty loopholes exploited by hedge funds, and offers insights into the complex dynamics of leveraged loans and private equity during financial unrest.
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Creditor-on-Creditor Violence Explained
- Creditor-on-creditor violence involves lenders with equal standing in a company's debt structure.
- Larger lenders can exploit loopholes to gain an advantage over smaller lenders, even within the same debt tier.
How Creditor-on-Creditor Violence Works
- All lenders are governed by the same loan document, regardless of entry point or investment strategy.
- Larger lenders can manipulate the refinancing process to their benefit, disadvantaging smaller lenders.
The Pluralsight Case
- The Pluralsight case exemplifies (mild) creditor-on-creditor violence in private credit.
- Despite initial indignation, the situation was resolved relatively smoothly with the sponsor handing over control.
