A disputed debt exchange that was later found to violate a loan agreement has left a group of lenders facing roughly $400 million in damages and interest – the largest award yet in the wave of lender-on-lender priority fights that surged following the COVID-19 pandemic.
In a Law360 article, “$400M Serta Ruling Offers Warning On Uptier Deal Risks,” Yetter Coleman LLP partner Jamie Aycock examines what the July 7 remand decision in the Serta Simmons Bedding litigation means for lenders, borrowers, sponsors and their counsel as they structure liability management transactions or litigate the disputes that follow.
Aycock explains how the ruling reinforces a central principle: Courts will enforce loan agreements as written. Drawing on the Serta decision and other recent cases, Aycock identifies practical lessons for both deal lawyers and litigators navigating liability management transactions.
Aycock recommends that deal lawyers:
- Define every exception they plan to rely on.
- Address lien subordination explicitly.
- Treat governing law and forum as part of the risk.
- Say loudly if the agreement authorizes the transaction.
While litigators should know:
- The remedy is what the contract says it is.
- Once the text is breached, fairness arguments are unlikely to reduce the bill.
- It’s important to lead with the express term, not the implied covenant.
Aycock is a business trial lawyer who handles complex commercial and restructuring-related litigation.
Read the full article: Law360 – $400M Serta Ruling Offers Warning On Uptier Deal Risks