RT Journal Article
SR Electronic
T1 Control Through Observer Rights and a CRO
JF The Journal of Private Equity
FD Institutional Investor Journals
SP 56
OP 58
DO 10.3905/jpe.2015.18.2.056
VO 18
IS 2
A1 Laurence Smith
YR 2015
UL https://pm-research.com/content/18/2/56.abstract
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