Matt Levine’s Money Stuff: Can the Lenders Stick Together?

Cooperation

Here is my schematic description of modern “liability management exercises”:

1. A company borrows $1,000 in good times from a bunch of lenders.
2. It runs into bad times, can’t pay back the $1,000, and needs more money to stay afloat.
3. It goes to some of its lenders — ones who hold 51% of its debt — and says “Look, we don’t have $1,000. But here’s a deal. If you lend us $100 today, on top of the $510 you already gave us, we will pay you back $800 in three years, a nice $190 bonus. But in exchange, you have to vote ...