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ARTICLE · 01 MAY 2023

Deleveraging Through The LMA Intercreditor Distressed Disposal: How To Navigate A Challenge-Free Process

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A distressed disposal (Distressed Disposal) under an LMA-based intercreditor agreement1 (ICA) is a powerful restructuring tool. It has the potential to significantly de-lever a business...

United KingdomInsolvency/Bankruptcy/Re-Structuring
Sonya Van de Graaff
Sonya Van de Graaff
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Executive Summary

A distressed disposal (Distressed Disposal) under an LMA-based intercreditor agreement1 (ICA) is a powerful restructuring tool. It has the potential to significantly de-lever a business for the benefit of the "in the money" class of lenders (which, for ease of terminology, we will refer to as the "Senior Lenders").

Yet, unlike similar tools (such as company voluntary arrangements (CVAs), schemes of arrangement and restructuring plans), it receives little press attention. This is for two reasons, each of which should make the process even more appealing for Senior Lenders. The first is that it is a contractual right, requiring no court involvement or recourse to statutory tools. The second is that, based on the limited case law on the process, it has rarely been challenged.

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