Milbank LLP Alternative Investments partners John Goldfinch and James Warbey were interviewed by International Financing Review (IFR) on the proliferation of a new technique that allows European CLO managers to participate in “priming transactions.”
In response to the priming technology utilized in recent restructurings, mainly by US borrowers such as J. Crew, Travelport and Revlon, the new anti-priming provisions will make their first appearance in the UK and Europe as part of the Bain Capital Euro CLO 2022-2.
Mr. Goldfinch, who is working on some of the first European CLOs to employ the new tactic, said, “This is just the latest piece in a long list of new technology that we have helped develop over the years, starting with corporate rescue loans, then loss mitigation obligations, which allow CLOs a limited new money participation in what in the US are known as DIP loans: debtor-in-possession loans.”
He added, “We’re now taking it to the next step – to cover new restructuring strategies which were first seen in the US, in J. Crew, Boardriders and TriMark – and which have begun to spread to Europe. What we’re anticipating is that we will see these liability management techniques be used more in the European market where we get more distressed entities.”
He noted that while the concept is new and investors and credit rating agencies will need time to adjust, he “expects it to percolate though the market quite quickly.”
