The recent financial crisis of 2007–2009 has left corporate America in turmoil. Management teams and their advisors are struggling to unravel unwieldy and unsustainable capital structures that were engineered in an era characterized by excessive valuations and risk taking. While rationalizing these capital structures, distressed companies seek consensual resolutions with competing stakeholders to avoid costly and protracted Chapter 11 cases. Collective action is one tool that furthers this goal without doing violence to lender expectations.
To some, collective action may seem too strong a medicine. However, the courts have made clear that group decision-making is a proper and lawful means of proceeding under most forms of syndicated loan documents.
