Goldberg Kohn Bankruptcy & Creditor's Rights Principal Randy Klein was quoted in "$50bn Credit Fund Caught on Both Sides of Distressed Debt Dispute," a Financial Times article, published Feb. 14, 2023. Focused on Angelo Gordon's differing positions in the contested Revlon and Serta Simmons bankruptcies, the article highlights novel financial structures that give highly indebted companies financial lifelines but allow a majority of lenders to swap existing debt into a tier of newly issued debt that receives the first claim on a company's assets.
Angelo Gordon, one of the world's savviest corporate credit investors, is a long time lender to both Revlon and Serta Simmons. Each company is currently in Chapter 11 bankruptcy proceedings in the United States. With respect to Revlon, Angelo Gordon is poised to seize control after joining a slim majority of lenders that offered rescue financing in May 2020 – a deal that left other creditors behind.
However, with Serta, Angelo Gordon is among the creditors excluded from a similar emergency financing assembled in June 2020. The $50 billion fund manager is now at risk of recovering pennies on the dollar from its investment in Serta and, along with other stranded creditors, will try to convince another bankruptcy court that the majority group violated their rights.
The stance strikes Goldberg Kohn's Randy Klein as inconsistent.
"It is definitely a bad look to try to propose an amendment [to a loan contract] that may have left minority lenders behind, and then complain about lack of good faith when they're on the receiving end," said Mr. Klein in the article.
In Revlon, Serta and other cases, the majority lenders have been accused of steamrolling a smaller group to snatch outsized profits when companies are reorganized in bankruptcy.
Mr. Klein has written extensively on the subject of Lender Liability Management, including "Contractual Traps for Minority Lenders or Fraudulent Transfer Risk for the Majority?" and "Restoration of the Duty of Good Faith." He has also been previously quoted on the topic in the Financial Times article, "Slick Lawyers Test the Limits in Distressed Debt Machinations."
The Revlon and Serta bankruptcy disputes are expected to be resolved in the next few months.