Lenders Seek To Avoid Creditor Violence

As U.S. businesses face ongoing economic headwinds, commercial lenders are acting more aggressively to reduce their exposure to rogue actions by co-lenders. In a number of transactions over the last several years, lenders have broken with their lending syndicates to cut self-serving restructuring deals with struggling companies at the expense of the rest of their fellow lenders. To prevent this "creditor-on-creditor violence," lenders are increasingly entering into cooperation agreements earlier in the financial restructuring process—seeking to create a unified front among their lender groups at the first signs of borrower distress. Lenders believe these proactive efforts will reduce the risk of rogue actions by a subset of their lending syndicate and prevent the value-destructive disputes that they generate.