Schulte Roth & Zabel partner Doug Mintz spoke to Bloomberg for the article, “Hedge Funds Find It’s Hit First or Get Hurt in Distressed Fights.” 

The article discussed the emergence of a new strategy among hedge funds and other large investors in distressed debt scenarios, termed “non-pro rata up-tiering,” a strategy that involves restructuring deals that offer select creditors better terms on debt swaps compared to others, potentially leaving certain investors at a disadvantage. 

While these recent transactions may upset creditors, companies contend that out-of-court restructurings often yield better outcomes than bankruptcy filings. Doug spoke about the likelihood of an increase in non-pro rata uptiering deals, “We are entering the next chapter, resulting from many years’ worth of trends; companies and lenders are looking to resolve issues way in advance of potential insolvency. What we’re seeing are individual creditor groups working alone to impact their own recoveries.” 

Read the article here. (subscription required)

In an article for the New York Law Journal titled, “Novolex Holdings: A Rare Look at an RWI Claim Dispute,” Schulte Roth & Zabel of counsel Howard B. Epstein, partner Theodore A. Keyes and associate Julia R. Cummings discuss representation and warranties insurance (RWI) in the context of Novolex Holdings v. Illinois Union Insurance, which provides important lessons for insurers and M&A practitioners.

Over the past decade, RWI has emerged as a critical tool to mitigate risk in M&A transactions. In fact, while RWI may initially have been seen as a novelty, it is now viewed as a relatively standard requirement in M&A transactions.