Getting inside each other’s heads

Understanding the approach of lenders and DB pension trustees in stressed multi-creditor refinancings and restructurings

As we continue to navigate through economically straitened times, we are likely to see more challenging multi-creditor refinancings involving companies and groups with defined benefit (“DB”) pension schemes. These situations can become extremely complex – and understanding the perspectives of bank lenders, bondholders and DB scheme trustees is vital if a satisfactory outcome is to be achieved; and unnecessary value destruction avoided.

With this in mind, we have produced Getting inside each other's head jointly with Grant Thornton UK LLP – a paper which seeks to enable lenders and DB trustees to understand each other’s likely position in a stressed refinancing or restructuring transaction from both commercial and legal perspectives. The aim is to help mitigate value destruction through the parties failing to agree appropriate terms due to misunderstandings or misperceptions around the positions and priorities of other stakeholders - in turn leading to the further demise of the corporate borrower/DB scheme sponsor.

Whilst this paper has been written in challenging economic times, its principles apply in relation to any stressed corporate refinancing or restructuring involving multiple creditors, including lenders of various forms and a UK DB pension scheme.

The paper explores the perspectives of differing stakeholders in a refinancing or restructuring scenario by considering the position of a “fairweather” company which is performing well – and then, using a fictional case study (starting on page 8) involving a group called “Steadyco International PLC” considers how various parties may behave during progressive periods of corporate stress.

Download the Paper

This is a joint paper by Grant Thornton and Herbert Smith Freehills