The big stack printed more chips

Sometimes winning a game of poker comes down to one thing...

Playing with the most chips at the table. ♣️

Even the most talented poker players will tell you, being the “big stack” is a significant advantage—not only can you play out more hands, but your options for 𝘩𝘰𝘸 you win are more plentiful: frequent calls, intimidating bets, even large bluffs.

But, what if the rules of poker allowed the person with the most chips to issue themselves more chips, anytime? Well then, why even play: the game’s rigged.

That’s how 𝗪𝗲𝘀𝗰𝗼 / 𝗜𝗻𝗰𝗼𝗿𝗮 minority bondholders felt in 2022.

In 2022, a majority of noteholders in 𝗪𝗲𝘀𝗰𝗼 / 𝗜𝗻𝗰𝗼𝗿𝗮’s bonds amended the secured notes indenture to permit additional priority lien notes to be issued, 𝘣𝘶𝘵 only to them—and then, using the supermajority voting power those notes granted them, stripped the security from the remaining noteholders—in other words, the “big stack” unilaterally issued themselves more chips from other players’ stacks.

While a bankruptcy judge found for the aggrieved minority noteholders and invalidated the transaction in mid-2024, the case was not a slam dunk.

As a result, in 𝗥𝗮𝗰𝗸𝘀𝗽𝗮𝗰𝗲’𝘀 Q1 2023 credit deal, “𝗨𝗽𝘁𝗶𝗲𝗿 𝗘𝘅𝗰𝗵𝗮𝗻𝗴𝗲” protections were introduced to disregard consents from holders for:

1. Incremental debt provided by an affiliate of the borrower,
2. Transactions without a bona fide business purpose, or
3. Transactions with the purpose of changing voting thresholds

These terms haven’t yet made further advancements into the public credit markets as of Q3 ‘24, but are ones to watch.

At , we keep track of Wesco / Incora and other liability management-related terms, benchmarking them against relevant deals to see what’s on-market.

Message me if you’d like access to the Excel with deal data on Uptier Exchange terms.