Cloud 9fin Jane’s LME Addiction — DQ lists are overrated
Jul 17, 2025
Joining the conversation are Jason Mudrick, founder and chief investment officer at Mudrick Capital Management, with a sharp focus on distressed investing, and Dan Fisher, partner at Akin Gump, co-heading the Capital Solutions Group. They tackle the inefficacies of disqualified lender (DQ) lists, questioning their true impact and worth. The duo delves into the strategies sponsors employ in credit markets, the implications of Distressed Qualified lists, and the complexities of navigating financial transactions, advocating for better transparency and efficiency in the sector.
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Expanded Scope of DQ Lists
- DQ lists intend to exclude certain lenders, mainly competitors, from credit agreements to protect borrower interests.
- Recent trends show expanded scope and enforcement power, including retroactive application and forced sales, increasing sponsor control.
DQ Lists Fail at Exclusion
- DQ lists do not effectively prevent distressed or opportunistic funds from gaining economic ownership via participation trades.
- They reduce liquidity and increase costs, ultimately harming original lenders and complicating deal execution.
NEP DQ List Confusion
- In NEP, Carlisle added about 50 firms to the DQ list, surprising lenders and causing confusion.
- Many funds on the list were no longer active, illustrating a lack of pruning over time.