Distressed Company Lenders Look to Cooperate to Avoid ‘Violence’

Efforts by struggling companies to shore up liquidity by pitting their lenders against one another have spawned a wave of controversial restructuring deals, but in many cases also pushed Wall Street firms to band together to thwart financial gamesmanship.

Cooperation agreements among lenders of private equity-backed companies are on the rise in what attorneys say is the most effective defense to a surge of liability management transactions by struggling portfolio companies trying to avoid bankruptcy by raising fresh cash from select creditors.

From one distressed situation to the next, financial creditors are left with a prisoner’s dilemma of either trying ...