Contributed By Winston & Strawn London LLP
Lenders and borrowers are free to agree contractual terms. The Loan Market Association syndicated facility agreements include a choice between restricting or permitting debt buy-backs in certain circumstances and include optional provisions which disenfranchise a sponsor that becomes a lender. As well as restrictions on borrowers’ purchases, lenders are increasingly seeking an absolute restriction on sponsors or other shareholders acquiring a portion of the debt which would allow them to block a scheme of arrangement of the debt even when they are disenfranchised.
Where debt buy-backs are not expressly regulated within a facility agreement, a borrower or sponsor seeking to buy back its own outstanding debt will need to consider whether there are any other restrictions in the loan documentation which could prohibit a transfer of debt to it.