Thursday, August 11, 2011
Posted by D. Daniel Sokol
Paolo Palmigiano & Josh Sherer (Lloyds Banking Group) address Corporate Restructurings, Debt-for-Equity Swaps: Competition Law Perspectives.
ABSTRACT: This article discusses the application and practical implications of merger control rules to certain transactions not traditionally seen as mergers; namely, the taking for a certain period of time of an equity stake by a bank in a company that faces financial difficulty, in return for a write-down of (some of) the outstanding debt. This "debt-for-equity swap" is usually part of a wider restructuring and refinancing.
The authors suggest that such transactions rarely raise competition law concerns and that the application of merger control rules (and, in particular, obligations under the European regime as well as others to suspend completion until a formal clearance has been obtained) can be an unwanted and unnecessary additional hurdle in what is already a stressful and complex deal. At a time when restructurings are prevalent, we suggest that thought might be given to possible changes to the application of suspensory obligations for debt-for-equity deals.