How Creative Tactics by Junk Borrowers Are Forcing Creditors to Close Ranks

The end of rock-bottom interest rates has made it harder for struggling companies to access new funds. So they’ve been seeking out new ways to deal with their debts. Often, this means exploiting loopholes in their bond or loan documentation to favor one set of creditors over another. The company survives, but lenders left out in the cold can end up with heavy losses.

Alarmed at this turn of events, debt investors are circling the wagons. Many have been signing cooperation agreements that force them to act in concert and negotiate better terms as a whole, rather than go off and make a side-deal with the company and its owners.