A Tale of Two Rulings: Serta, Mitel Cases Remind Why Contract Language Matters in Debt Documents

Finance attorney Faisal Kraziem and bankruptcy attorneys Lynne Xerras, David Wirt and Phillip Nelson co-authored an article for Pratt's Journal of Bankruptcy Law analyzing two court cases involving uptier transactions. In one case, the U.S. Court of Appeals for the Fifth Circuit determined that the debt exchange undertaken by Serta Simmons Bedding did not quality as an "open market purchase" under the terms of the company's 2016 credit agreement, meaning its uptier transaction was not permitted, and remanded certain aspects of the case to the U.S. Bankruptcy Court for the Southern District of Texas. In another case, the New York Supreme Court's First Appellate Division ratified a similarly structured uptier transaction initiated by Mitel Networks. This article focuses on the Serta case, providing extensive background information and detailing how the Fifth Circuit interpreted the "open market purchase" provision in the credit agreement. The authors also briefly describe the Mitel court's reasoning and provide practice pointers when structuring uptier and liability management transactions.

The attorneys additionally published a Holland & Knight alert on this topic.

READ: A Tale of Two Rulings: Serta, Mitel Cases Remind Why Contract Language Matters in Debt Documents