Be Careful What You Contract For...
Secured Credit Committee
American Bankruptcy Institute
The recent decision of Hon. Arthur J. Gonzalez in the chapter 11 cases of Chrysler LLC and its affiliated debtors recalls the oft-repeated maxim "be careful what you wish for." In re Chrysler LLC, et al., Case No. 09-50002 (AJG) (Bankr. S.D.N.Y. April 30, 2009). In the context of syndicated lending, lenders have "wished for" and contracted to enter into intercreditor agreements that appoint a single agent to act on behalf of the syndicate, usually subject to the consent of holders of a specified percentage of syndicated loans. Such agreements greatly reduce the costs of collective action and prevent individual lenders from negotiating preferential treatment for themselves at the expense of the rest of the syndicate. Who would not wish for such a quick, efficient and fair decisionmaking process?