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Appeal of Shared National Credit (First Quarter 2017)

Background

A participant bank appealed the troubled debt restructure (TDR) designation assigned to a senior secured revolving credit facility during the first-quarter 2017 Shared National Credit (SNC) examination.

Discussion

The appeal disagreed with the TDR designation, asserting that the lenders were adequately compensated for the modified extension that included a 20 percent commitment reduction, an interest rate increase of 150 basis points, and a springing maturity.

Conclusion

An interagency appeals panel of three senior credit examiners concurred with the SNC examination team’s originally assigned TDR designation, stating that the borrower was experiencing financial difficulty and received a concession from the bank group.

The borrower was unable to repay the maturing debt and the bank group granted a concession by extending the maturity date to prevent an impending default on the revolver. In addition, the bank group permitted two revolving credit holders to roll over their exposure into a restructured term loan B. Some of the unsecured note holders did not participate in the distressed debt exchange offer, illustrating that the borrower may not have access to other funds at a similar rate.