Serta bankruptcy has raised the stakes for those who draft credit agreements
Affirmation of ‘uptier rights’ of non-PTL creditors signals a likely continuation of creditor-on-creditor violence.
Expert analysis by? Christopher Faille
The resolution of the Serta Simmons bankruptcy by the bankruptcy court in the southern district of Texas, in June, has visited significant losses on some of the bedding company’s creditors and, more importantly, raised the stakes for the drafters of credit agreements.
It may matter considerably, going forward, whether a particular credit agreement does or does not have a so-called “Serta blocker” provision and what is the specific wording of that provision.
Serta blocking is not a new development demanded by this decision. Blocker language, with encouragement from the Loan Syndications and Trading Association, has been in use since 2020. That was the year Serta, which had severe liquidity difficulties though it had not at this point filed for bankruptcy, reached an agreement with certain “priority term loan” (PTL) lenders...