In The Know: Un-Serta-inty - What now for uptiers in Europe?

Investment Rating - The report does not explicitly provide an investment rating for the industry or specific companies discussed Core Insights - The Federal Court of Appeals ruled against Serta Simmons Bedding LLC's uptiering transaction, indicating that the "open market purchase" exception will not justify an uptier in many cases [2][5] - The Serta case highlights the importance of specific language in credit agreements, as the New York Supreme Court's decision on Mitel Networks suggests that successful uptiering transactions may still be possible depending on documentation [7][10] - The disparity in uptiering transactions between the US and Europe is noted, with European agreements typically lacking the "open market purchase" exception found in US agreements [12][15] Summary by Sections Serta Case - Serta raised USD 200 million in new financing and exchanged USD 1.2 billion of old loans for USD 875 million in new loans, which was contentious due to non-pro rata treatment [3][4] - The Federal Court of Appeals determined that Serta's transactions did not qualify as "open market purchases," leading to the vacating of the Texas Bankruptcy Court's summary judgment [5][6] Mitel Case - The New York Supreme Court found that Mitel's debt exchange was permitted under its credit agreement, allowing for the possibility of uptiering transactions [7][9] - The Mitel agreement allowed for broader exceptions compared to Serta, which contributed to the court's decision [9][10] European Market Impact - Uptiering transactions remain less common in Europe due to contractual and legal factors, and the recent US decisions are unlikely to change this [12][13] - European agreements typically require unanimous consent for subordination, providing further protection against uptiering [15][17] - Despite the differences, there is potential for uptiering transactions in Europe if agreements allow for amendments by a majority of lenders [16][17]