PT  - JOURNAL ARTICLE
AU  - Laurence Smith
TI  - Control Through Observer Rights and a CRO
AID  - 10.3905/jpe.2015.18.2.056
DP  - 2015 Feb 28
TA  - The Journal of Private Equity
PG  - 56--58
VI  - 18
IP  - 2
4099  - https://pm-research.com/content/18/2/56.short
4100  - https://pm-research.com/content/18/2/56.full
AB  - Two of the weapons in the arsenal of a second lien, mezzanine, or other leveraged lender are observer rights and the ability to mandate that a borrower engage a chief restructuring officer (CRO). This article examines each of those rights and suggests reasonable limitations on them, reflecting a balance between the legitimate interests of borrower and lender. In situations in which a borrower is highly levered and has limited financing options, it may be forced to accept whatever terms a lender demands, but this article assumes the parties have relatively equal bargaining power.TOPICS: Private equity, portfolio construction, legal/regulatory/public policy, manager selection