Abstract
This Note explores the legal implications of uptier debt exchange transactions (UDETs) in the syndicated loan market. These transactions are restructuring strategies that allow distressed companies to exchange existing debt for “superpriority” debt, often to the detriment of excluded creditors. The Bankruptcy Code aims to balance debtor relief with creditor rights, but, as this Note demonstrates, UDETs exploit ambiguities in credit agreements to shift priorities in favor of certain lenders. This Note examines the pivotal case of In re Serta Simmons Bedding, LLC, a decision which highlighted the need for creditors to reassess whether the flexibility of their credit agreements comes at the cost of a high risk of subordination. This Note reviews the evolution of UDETs, particularly in the face of the economic fallout following the COVID-19 pandemic, analyzes key judicial responses prior to Serta, and proposes both statutory and contractual reforms to better protect excluded creditors and address loopholes in credit agreements.
Recommended Citation
Angela Chang,
Uptier Debt Exchange Transactions: A Winner-Take-All Battle in the Leveraged Loan Market,
90 Brook. L. Rev.
525
(2025).
Available at:
https://brooklynworks.brooklaw.edu/blr/vol90/iss2/4
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