Optimum’s antitrust claims threaten business financing
Washington, D.C. — MFA joined other leading financial trade associations* in filing an amicus brief urging the U.S. District Court for the Southern District of New York to reject claims that creditor cooperation agreements violate U.S. antitrust law. The suit brought by Optimum Communications, Inc. concerns whether agreements among creditors to negotiate collectively with a distressed borrower are unlawful under the Sherman Act.
Creditor cooperation agreements are a standard, procompetitive feature of credit markets. For investment managers that participate in creditors’ committees, the ability to act collectively, consistent with fiduciary obligations, helps ensure orderly and efficient restructurings.
“It is important that lenders are able to work together when companies struggle to repay loans,” said Jennifer Han, MFA Chief Legal Officer. “Creditor cooperation agreements support well-functioning credit markets and help ensure orderly restructurings that preserve value and strengthen confidence in lending markets. Weakening these protections would increase borrowing costs for companies, making it harder for businesses to grow and hire.”
The collective action by creditors to a loan agreement does not violate antitrust laws. Competition occurs when loans are originated and priced—not when lenders later seek to recover existing loans. Cooperation agreements preserve the long-standing principle that creditors in the same position should be treated equally. Cooperation agreements also prevent side agreements intended to benefit one creditor at the others’ expense.
The Brief additionally highlights that cooperation agreements are economically beneficial and widely understood by market participants. They reduce transaction costs, streamline negotiations, and support out-of-court restructurings that avoid unnecessary bankruptcies. The arguments advanced by the distressed debtor would create legal uncertainty, disrupt established market practices, reduce the availability of financing to companies, and increase costs.
Read the full amicus brief here.
*MFA joined the Loan Syndications and Trading Association (LSTA) and the Securities Industry and Financial Markets Association (SIFMA) in submitting the amicus brief.
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About MFA
Managed Funds Association (MFA), based in Washington, D.C., New York City, Brussels, and London, represents the global alternative asset management industry. MFA’s mission is to advance the ability of alternative asset managers to raise capital, invest it, and generate returns for their beneficiaries. MFA advocates on behalf of its membership and convenes stakeholders to address global regulatory, operational, and business issues. MFA has more than 180 fund manager members, including traditional hedge funds, private credit funds, and hybrid funds, that employ a diverse set of investment strategies. Member firms help pension plans, university endowments, charitable foundations, and other institutional investors diversify their investments, manage risk, and generate attractive returns throughout the economic cycle.
