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May 31, 2019

Kramer Levin Win for Aurelius Adds Protections Against Net-Short-Lender Activism in Leveraged Loans and High-Yield Debt

Kramer Levin advised Aurelius Capital Management LP on the application of the ISDA Credit Derivatives Definitions to failure-to-pay issues arising out of ongoing litigation regarding debt principal acceleration. The failure-to-pay issues in question had not previously arisen in the credit derivatives market, and advice was therefore novel and broke new ground in the application of market standard definitions to circumstances not previously considered. Our assistance also involved drafting argumentation submitted to ISDA’s Credit Derivatives Determinations Committee to ensure the correct and reasonable application of the definitions to the events in question. The Windstream strategy resulted in a number of additional protections being included in both leveraged loans and high-yield bond indentures to address what has been referred to as net-short-lender activism. This collateral impact from the CDS market was one of the most significant changes to market form documentation in the cash credit markets upon its completion in 2019.

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