American Tire: Rubber Hits the Road in Non-Ratable Chapter 11 Liability Management Transaction

Bankruptcy attorneys Lynne Xerras and Faisal Kraziem co-authored an article for The Banking Law Journal on liability management transactions (LMTs) and a recent court decision involving a non-ratable debtor-in-possession (DIP) loan in a Chapter 11 bankruptcy proceeding. Ms. Xerras and Mr. Kraziem explore how LMTs present a viable option for distressed companies seeking new capital before analyzing the U.S. Bankruptcy Court for the District of Delaware's ruling on a debtor-in-possession financing negotiated by debtor American Tire Distributors Inc. and its affiliates. As the authors explain, the case illustrates the importance of clear contract language in credit documents to preserve "sacred right" protections for minority lenders and avoid the risk of subordination.

Ms. Xerras and Mr. Kraziem also published a Holland & Knight alert on the American Tire case.

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