While there are many different types of liability management transactions, two forms of these transactions have recently become more common: (i) uptier transactions (which are discussed in Part I of this OnPoint), and (ii) drop-down transactions (which will be discussed in a to-be-published Part II).

Uptier transactions are where a borrower teams up with a majority of its financial creditors and amends the existing financing agreements to permit the issuance of new senior priming debt. In many instances, the majority creditors will subsequently exchange their existing debt for new senior priming debt. The non-participating minority creditors are then essentially left with subordinated debt.