Davis Polk partner Ken Steinberg discussed the usage of so-called “omni-blocker” covenants with Asset Securitization Report.

The article highlights a recent report by Octus titled “Opportunity in Chaos: Is It the Omni-Blockerʼs Time to Shine?” which describes the key aspects of omni-blocker covenants that aim to prohibit borrowers from finding new and creative ways to pursue aggressive, non-pro rata LMEs.

Ken noted that he has seen elements of the report’s hypothetical omni-blocker in post-restructuring loans, but resistance from borrowers eager to retain financing options make fully incorporating both steps in new loans unlikely anytime soon. Instead, he added that surgically applying three or four provisions can achieve much of what the omni-blocker aims to accomplish, although its goal of providing more expansive, future protection as LMEs evolve is a credible one.

“This is clearly meant to move beyond fighting the last battle, the last LME to emerge – somebody did a J. Crew LME, so let’s put in place a J. Crew blocker,” Ken explained. “This language wants to deal with the ‘unknown unknown.’”

“Octus: Omni-blockers may soon multiply,” Asset Securitization Reporter (May 23, 2025) (subscription required)

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