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20 March 2020

Dire Straits Opportunity: Debt Buyback

COVID-19 will affect corporate earnings significantly and lead to credit downgrades, covenant breaches and eventually credit defaults. Navigating in these dire straits may pose an opportunity for borrowers to buy back debt at a price well below par value and take advantage of the decline in trading prices on corporate debt. Borrowers and their owners, including private equity sponsors, should consider some of the options set out in this newsletter and capitalize on the catastrophic scenarios unfolding in Europe and the United States. Debt to be bought could be bank debt (term loans and revolving facilities) or bonds. We will refer to a debt buyback also in cases where the debt is bought by a fully aligned affiliate of the borrower, although this is technically not a “buyback” since the debt is not eliminated.

Henning Aasmul-Olsen

Partner

+45 30 37 96 50

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