Following the 2008/2009 financial crisis, credit buybacks were made in the syndicated loan market. Prior to the crisis, most credit contracts did not consider borrower buybacks and, in fact, many credit contracts were expressly subordinated to the condition that the borrower and his related companies were not eligible agents. In the wake of this financial crisis, many credit contracts specifically considered the ability of the borrower and/or his related companies to acquire loans (usually limited to term loans) either through non-proportional purchases on the open market or through a ”Dutch auction procedure” which, in many cases, must be open to all lenders in the pro-rata category of loans. This customer warning highlights some key issues that companies should consider when considering potential debt buybacks and liability management exercises. Debt buybacks are once again in the spotlight following the coronavirus crisis (COVID-19). The coronavirus pandemic (COVID-19) is not in play long enough to allow market participants to properly assess their long-term effects. However, in the short term, the pandemic continues to have an impact on markets, and many loans are valued at a significant discount. As a result, sponsors and borrowers are exploring opportunities to buy back their credit stock at significantly reduced prices, for example to enable them to build up equity at a discount, reduce external capital, or create capacity under ratio-based asset baskets. The increasing focus on transfer restrictions, coupled with a slow market on the purchasing side, has generated particular interest in buybacks, although they have been subject to certain restrictions in the past. Below is a general overview of the buybacks as well as some important thoughts for borrowers, sponsors and lenders.

Offers to exchange debts. Offers to trade may include a debt swap or debt swap. Unlike cash tenders, exchange offers involve a new issuance of securities and therefore require either dry registration of new securities or an exemption from registration.