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Relief from covenants and other provisions of debt documents is generally analyzed as a contractual matter. Often such provisions enable a small debtholder to block a waiver or amendment of the key terms of debt documents that most debtholders favor. One of the primary benefits of executing a debt restructuring under Chapter 11 is its ability to bind the dissenter with a class vote. Hence, in situations where a company can avail itself of Chapter 11, a hold-out strategy may work, but it is expensive, requiring a third or more of a class of debt. In Europe, where a company may not have access to a restructuring regime with similar provisions, the hold-out strategy has been more prevalent. The rationale behind a holdout strategy is simple: An investor or creditor will seek to acquire a portion of debt large enough to ensure that a debt restructuring cannot proceed without meeting its demands. A contingent of several like-minded parties may conspire to acquire a blocking stake, particularly in large companies where the amount of investment required to acquire such a blocking stake can be extremely large. Historically in assessing a hold-out strategy there were two points of reference: the contract and the relevant insolvency regime. Now, at least in Europe, there is a third point of reference—choice of law.

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