Cooperation Agreement
A lender Cooperation Agreement is an agreement among creditors to coordinate specified actions, information sharing and negotiations, often to reduce the risk that a borrower or sponsor divides the lender group through a selective liability-management transaction.
Cooperation agreements respond to lender fragmentation
A borrower seeking an exclusionary LMT can benefit when lenders compete for scarce participation rights.
A cooperation agreement attempts to reverse that incentive by making a significant lender bloc negotiate together instead of racing to secure individual preferential treatment.
The agreement can regulate both negotiations and trading
Members can agree not to support specified transactions outside the group and can restrict transfers unless the buyer joins the cooperation agreement.
Those provisions help preserve the group's voting percentage but can reduce liquidity for individual lenders.
Economic allocation rules matter
Some agreements protect pro rata treatment among members. Others give steering-committee or initial members additional fees or economics for organizing the group.
A lender joining later should not assume that cooperation means every member receives identical compensation.
Borrowers have begun resisting cooperation provisions
The ABA and 2026 restructuring commentary describe sponsor efforts to add anti-cooperation or anti-cartel provisions to new debt documents.
The market debate is still developing, including litigation and antitrust arguments over how far borrower restrictions on lender coordination can go.
Cooperation changes the bargaining game before the borrower makes an offer
Assume five lenders each hold 20% of a term loan. A borrower needs 51% support for a selective restructuring and can negotiate privately with each institution.
Without coordination, offering three lenders enhanced economics may be enough to create a majority coalition.
If four lenders holding 80% sign a cooperation agreement that bars separate participation, the borrower can no longer assemble a majority by peeling off one or two institutions. It must negotiate with the cooperating bloc or find another structure.
The agreement therefore creates value through collective bargaining power, but that value comes with costs: trading restrictions, information-sharing duties and reduced freedom for each lender to pursue an individual solution.
Common mistakes
Treating a co-op as a restructuring support agreement It is principally an agreement among creditors, not necessarily a deal with the borrower.
Assuming membership guarantees equal economics Steering and timing distinctions can matter.
Ignoring trading restrictions A lender can sacrifice flexibility by joining.
Example
Lenders holding 70% of a term loan sign a cooperation agreement requiring them not to participate in a non-pro-rata exchange unless the transaction is offered to cooperating members under the agreed allocation rules. The borrower now has less ability to assemble a separate majority coalition by offering one lender a better deal.
Example
Lenders holding 70% of a term loan sign a cooperation agreement requiring them not to participate in a non-pro-rata exchange unless the transaction is offered to cooperating members under the agreed allocation rules. The borrower now has less ability to assemble a separate majority coalition by offering one lender a better deal.
Professional note
A cooperation agreement changes creditor bargaining dynamics but can also reduce trading freedom. Review transfer restrictions, termination dates, permitted communications, fee allocation, steering-committee economics and any anti-cooperation provisions in the underlying debt documents.
Related terms
- Required Lenders
Required Lenders are the lenders holding the contractually specified percentage of loans, commitments or exposures needed to approve many amendments, waivers, directions and other collective lender actions under a credit agreement.
- Liability Management Transaction (LMT)
A Liability Management Transaction, or LMT, is a financing or restructuring transaction used to alter a company's debt obligations, liquidity, maturity profile, collateral or creditor priority, often outside a formal bankruptcy process.
- Non-Pro-Rata Exchange
A non-pro-rata exchange is a debt exchange in which creditors within the same existing class or tranche are not offered or do not receive the same opportunity, allocation or economics in proportion to their holdings.
- Exit Consent
An exit consent is a consent to amend existing debt documents that is delivered by a creditor in connection with exchanging or tendering that debt, typically just before the creditor exits the old instrument.
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