Schulte Roth & Zabel partners Craig Stein, Phillip Azzollini, Daniel Oshinsky and Martin Sharkey’s chapter, “U.S. and EU CLOs: Market Trends and Recent Regulatory Developments,” was published in Global Legal Group’s International Comparative Legal Guide – Securitisation 2024.  

In this piece they explore current market trends and regulatory developments impacting the CLO market. In 2023, the market for collateralised loan obligations (CLOs) in the United States and Europe experienced significant fluctuations. Following a turbulent 2022, CLO managers anticipated increased investor demand. However, challenges arose early in the year, including notable bank failures in the US and concerns over inflation, SEC regulations, and the transition from USD LIBOR to SOFR. These obstacles hindered CLO issuance through the second quarter of 2023.  

However, many issues were resolved by the end of the third quarter, leading to a resurgence in CLO issuance. Additionally, there was a rise in middle-market CLO offerings, continuing into 2024.

In his latest article for The Bankruptcy Strategist titled, “Delaware District Court Could Guide Supreme Court Purdue Pharma Decision,” Schulte Roth & Zabel of counsel Michael L. Cook discusses how a Delaware District court decision, In re Port Neches Fuels, LLC, could guide the US Supreme Court’s forthcoming decision in Harrington v. Purdue Pharma L.P.  with respect to third-party releases in Chapter 11 reorganization cases.

A bankruptcy court, said the district court, properly held that derivative claims based on “piercing the corporate veil theory of liability [were] released under” a confirmed reorganization plan, but that direct “claims for negligent undertaking” were not released and “could be asserted” in state court against the debtors’ equity sponsors (Sponsors). In re Port Neches Fuels, LLC, 2024 WL 1298590, *1 (D. Del. Mar. 27, 2024). The confirmed plan, affirmed by the district court, had released “any and all claims … (including any derivative claims, asserted or assertable on behalf of the Debtors [and] the Reorganized Debtors … against certain released parties,” including the debtor’s equity Sponsors. When plaintiffs sued the Sponsors in Texas state court, the defendants asked the bankruptcy court to “enforce the plan, arguing that [all of] the plaintiffs’ claims were . . . released under the plan.” Id.

Read more here. 

Schulte Roth & Zabel partner Ian Levin spoke with The Drawdown for the article, “The FTC’s non-compete ban and its consequences.” 

The Federal Trade Commission (FTC) announced a final rule banning non-compete clauses on April 23, 2024. However, within 24 hours, two lawsuits were filed against the rule, with a third following later in the week. The chair of the FTC, Lina M Khan, argues that non-compete clauses keep wages low, stifle innovation and hinder economic growth. 

Ian highlighted the potential impacts on private equity firms, stating, “Private equity is potentially affected at two levels. Internally, firms use non-competes to protect their IP and confidential information. While the same concerns exist at the portfolio company level, talent is often the ‘product’ they’re backing, particularly at portfolio companies that provide services. If the FTC rule were to become effective, they could be at risk of losing their investments overnight.” 

Non-compete clauses aren’t the sole method to retain talent; the industry’s carry structure, which incentivizes seniority and long-term commitment, plays a role. Ian noted how the FTC rule’s broad wording might encompass other retention measures, raising concerns about unintended consequences. 

“While the preamble to the FTC rule elaborates on what is intended by the rule, the wording of the rule itself is so broad, it potentially captures any measures designed to prevent employees from leaving, such as long-term incentive and other deferred compensation arrangements. Hopefully, we will see more guidance from the FTC on this, as it might be an unintended consequence,” he added.  

Read the article here.