Our Legal Insights Blog

I recently attended the Annual Conference and Exhibition of National Conference on Public Employee Retirement Systems (NCPERS) in Las Vegas. NCPERS is the leading voice and resource for the public pension industry in the United States. I attended three panels focused on how private markets and related investments are interacting with this industry, curious about how pension fund trustees - most of whom are not trained investment professionals - discern quality among private credit managers pitching their platforms.

This week I sat down for breakfast with a small group of senior credit professionals in New York. It was the eighth stop in the documentation risk roundtable series, part of the Covenant Exchange initiative. It came after Amsterdam, Los Angeles, Paris, Seoul, Tokyo, Sydney, and Melbourne. New York is the city where the cooperation agreement was born, and it is now the city where the cooperation agreement is starting to come apart.

In Part 1, I walked through what fifteen years did to the Optional Redemption, Debt, and Restricted Payments covenants in Capsugel's documentation, comparing the 2011 unsecured bond against the senior secured deal marketed last week. In this part 2, we continue the review of how, provision by provision, the borrower gained flexibility with the loan market's fingerprints all over the bond.

We keep hearing that covenants have erodedover the past 15 years, but how many of us know what that really means in practical terms?

On the last day of April, I sat down for breakfast with a small group of senior credit professionals in Melbourne. It was the second of two Australian sessions in the documentation risk roundtable series, part of FLT’s Covenant Exchange initiative. It was the sixth stop after Amsterdam, Los Angeles, Paris, Seoul, Tokyo, and Sydney. 

This week I convened a Covenant Exchange roundtable in Sydney. Participants from private credit, super fund, family office, asset management, and legal shared views on documentation risk, and the conversation ranged across jurisdictions and case studies. The repeating theme, which we’ve seen at each of these events, was that documentation matters, and so does everything that sits on top of it.

The LMA's first Tokyo conference welcomed over 300 people to hear from European credit managers and Japanese LPs. Documentation was center stage, and it matters at two levels: the loan agreements between borrowers and lenders, and the CLO indentures between issuers and noteholders. Japanese investors are paying attention to both.

The Japanese LBO market still has what disappeared from the US and European markets a decade ago: a commercial bank on the senior piece and a maintenance covenant still in the deal. Last night at the Andaz in Tokyo, we sat down for the second Covenant Exchange dinner of this APAC run to work out how long those things will hold. I was delighted that the conversation went deep into Japanese market structure - I had so much to learn.