Distressed Debt and Claims Trading

Bank Debt Auctions

For clients participating as buyers or sellers in auctions for bank debt portfolios, we prepare bid documentation, collect bids, evaluate bids, and guide you through the complete bidding and settlement process. When acting for buyers, we analyze and advise on issues relating to the underlying claim documentation and negotiate claims transfer documentation.

Bulk Transfers and Portfolio Analysis

We advise our clients as both buyers and sellers in bulk transfers of claim and debt portfolios, and we provide a full analysis of the underlying claims recovery, credit review, and transfer issues.

Rights Offerings

The Group advises clients as participants or backstop parties of debt and equity rights offerings in connection with a debtor’s plan of reorganization. When our clients are the beneficial holder of the debt or equity — and not the record holder — our lawyers ensure that their right to participate is thoroughly documented and protected. We understand how crucial it can be to receive proceeds as soon as possible; accordingly, we ensure that the transfers of any proceeds after a successful rights offering are settled as quickly and comprehensively as possible.

We regularly advise buy-side and sell-side clients at each stage of a debt or claims transaction. In addition to highlighting the risks associated with any given trade and formulating the optimal settlement or structuring options, we represent clients in the negotiation of trade confirmations, purchase and sale agreements, participation agreements, proceeds letters, and “big boy” letters.

The lawyers in the Distressed Debt & Claims Trading Group are active members of the Loan Syndications and Trading Association (LSTA), Loan Market Association (LMA), and Asia Pacific Loan Market Association (APLMA); as a result, they have long-standing familiarity with the protocols and recommended documentation advocated by each association. We have a comprehensive understanding of the U.S., European, Asian-Pacific, and emerging secondary loan markets, and we regularly facilitate loan transfers worldwide.

We advise buyers and sellers on all aspects of bankruptcy claim trading transactions, ranging from bilateral transfers to complex multi-party claims auctions. The Group’s lawyers structure, prepare, and negotiate the transaction documents, review and analyze the underlying proofs of claim and supporting documentation, and file any transfer notices. We address the various risk silos that can influence claims trades — including notional, recovery, and counterparty risk — to meet your needs. Additionally, we guide you through every step of the negotiation process.

Club Syndications of Claims

We regularly advise clients in structuring and participating in club syndication deals and joint-venture claim participations. We negotiate and structure each transaction step to address recovery, notional amount, counterparty credit risk, voting, control, and information rights.

Leverage Opportunities

We design structures that enable our clients to leverage their bankruptcy claims positions. In conjunction with Schulte’s Finance Group and Structured Finance & Derivatives Group, we advise on leverage opportunities where the clients’ claims serve as collateral for a loan or structured product.

Claims Trade Auctions

For sellers, we prepare bid documentation, collect bids, assist in evaluating bids, and provide guidance through every stage of the bidding and settlement process. When acting for buyers, we analyze and advise on issues relating to the underlying claim documentation and negotiate claims transfer documentation.

Schulte regularly provides regulatory and compliance advice on the interaction between LSTA and LMA guidelines and U.S. and European securities laws. The Distressed Debt & Claims Trading Group stays up to date with regulatory legislation that is in effect or in development, and continually monitors the position of bank debt and claims as an asset class. Our lawyers routinely advise clients on trading in different levels of a company’s capital structure, the relationship between a company’s equity and bank debt, and their position when trading on the basis of syndicate confidential information and borrower confidential information.

Many compliance and logistical considerations can affect the liquidity and settlement of securities when a company issues new equity under a Chapter 11 plan, an English law scheme of arrangement, or another form of restructuring. The new equity holders, the reorganized company, and transfer agents will often be unaccustomed to settling post-reorganization equity trades and unfamiliar with the governing terms of the new equity instruments or the provisions in the underlying stockholders’ agreement.

We understand the unique issues facing the various parties in settlement of post-reorganization equity transactions and work with them and their respective advisers to establish consensus on all necessary transfer documents and steps, including, if required, any securities law opinions.