Insights
Alerts & Publications
Lenders’ Guide to Priming Exploitation

Lenders’ Guide to Priming Exploitation

February 13, 2025

For the past several years, we have seen an increase in liquidity and liability management transactions that have stretched credit documentation and attracted significant litigation. Whether it’s sponsors and companies looking to preserve their ownership interests, or investors looking to leverage a temporary crisis to improve their loan position, these transactions have attracted substantial attention and scrutiny in the courts and the market. A cross-disciplinary team of finance, restructuring, and litigation attorneys at O’Melveny have been following this trend closely and have to put together a Priming Transaction Tracker to continue monitoring new developments. We also highlight below the numerous articles and alerts we have published on this topic, which will continue to be updated as new deals get announced, new lawsuits get filed, market practices evolve, and new judicial decisions clarify this fluid area of the law.

Subscribe here to receive notifications when this page is updated.

Prior Client Alerts:

Deal Tracker:

Deal	Provision at Issue	Status
AMC Entertainment	Lien priority provisions of first lien-second lien intercreditor agreement	Challenge to July 2024 non-pro rata drop down transaction currently pending in New York State Supreme Court
Boardriders	Open market purchase provisions Subordination of liens sacred right	Claims survived motions to dismiss, but lawsuit settled after acquisition
Cirque du Soleil	Investment and restricted payment covenants Unrestricted Subsidiaries	Not challenged
Del Monte Foods	Designation of Excluded Subsidiary Automatic release of liens	Challenge to August 2024 non-pro rata drop down transaction currently pending in Delaware Chancery Court
Hunkemoller	Prohibition on non-pro rata consideration as inducement for waiver or amendment Pro rata redemption requirement Reduction in principal sacred right Release of liens sacred right	Challenge to July 2024 non-pro rata uptier transaction currently pending in New York State Supreme Court
Incora	Voter dilution Subordination of liens sacred right	Trial held; Bankruptcy court ruled in favor of the excluded lenders to unwind the uptiering transaction
Instant Brands	Fraudulent transfer	Challenge to January 2023 non-pro rata drop down transaction currently pending in US Bankruptcy Court for the Southern District of Texas
J. Crew	Investment negative covenants Unrestricted Subsidiaries	Settled after J. Crew sought declaratory judgment that proposed transaction did not violate credit agreement
Lions Gate Entertainment Corp.	Modification and release of guarantee sacred right Pro rata redemption right Release of right to bring litigation Implied covenant of good faith and fair dealing	Canada Pension Plan breach of contract suit pending for violation of the terms of a 2021 notes agreement through a May 2024 non-pro rata bond exchange
Mitel	Open market purchase Subordination of liens	In December 2024, New York Supreme Court’s First Appellate Division directed the dismissal of the excluded lenders’ contractual challenges to Mitel’s 2022 non-pro-rata uptier exchange. Claims for breach of implied covenant of good faith and fair dealing and tortious interference previously dismissed in January 2024.
Murray Energy	Open market purchase provisions Subordination of liens sacred right	Lawsuit dismissed
Neiman Marcus	Investment and restricted payment covenants Unrestricted Subsidiaries	Settled after lawsuit was filed
PetSmart/Chewy	Guarantor release provisions Investment and restricted payment covenants Unrestricted Subsidiaries	Settled after PetSmart filed a lawsuit alleging Citibank failed to release collateral in accordance with the terms of the loan documents
Revlon	Investment covenants Unrestricted Subsidiaries Voter dilution	Lawsuit dismissed
Robertshaw	Subsidiary definition Incurrence of Indebtedness Voter dilution	Trial held; Bankruptcy court ruled lenders did not breach contract or implied covenant, but company breached credit agreement; transaction not unwound; priority and amount of damages claim remains pending
Serta	Open market purchase provisions Subordination of liens sacred right	Filed for bankruptcy, claims dismissed by bankruptcy court on summary judgment; Fifth Circuit reversed and remanded
TPC Group	Subordination of liens sacred right Pro rata provisions	Bankruptcy court ruled against minority lenders
Travelport	Investment negative covenants Unrestricted Subsidiaries	Settled after lawsuit was filed
TriMark	Open market purchase provisions Subordination of liens sacred right	Settled after certain claims survived motion to dismiss

This memorandum is a summary for general information and discussion only and may be considered an advertisement for certain purposes. It is not a full analysis of the matters presented, may not be relied upon as legal advice, and does not purport to represent the views of our clients or the Firm. Jennifer Taylor, an O’Melveny partner licensed to practice law in California; Jeff Norton, an O’Melveny partner licensed to practice law in New York; and Lauren M. Wagner, an O'Melveny counsel licensed to practice law in New York, contributed to the content of this newsletter. The views expressed in this newsletter are the views of the authors except as otherwise noted.

© 2025 O’Melveny & Myers LLP. All Rights Reserved. Portions of this communication may contain attorney advertising. Prior results do not guarantee a similar outcome. Please direct all inquiries regarding New York’s Rules of Professional Conduct to O’Melveny & Myers LLP, 1301 Avenue of the Americas, Suite 1700, New York, NY, 10019, T: +1 212 326 2000.