What a support agreement commits each side to
A restructuring agreement, often called a restructuring support agreement or RSA, commits the company and the signing creditors to support a particular deal, usually described in an attached term sheet. Signing creditors agree to vote for the plan and not to back competing proposals, while the company agrees to pursue the transaction on a timeline. The agreement often includes milestones for filing, obtaining approvals, and confirming a plan, and missing them can let creditors terminate. Many RSAs also require anyone buying a signing creditor's claim to join the agreement, so the support travels with the debt.
Points that get negotiated
The company's board will want a fiduciary out that lets it consider a superior proposal without breaching the agreement. Creditors focus on the treatment of their claims, fees and expenses, releases, and the events that let them walk away. Some RSAs give creditors who sign early or provide new money payments or rights that others do not receive, which can draw objections from those left out. In a Chapter 11 case, solicitation of votes generally has to follow court rules, so agreements signed before the filing are drafted with that in mind, and the company often asks the court for approval to assume the agreement.
Questions to answer before signing
If you are a creditor, we look at what you are committing to, whether the commitment survives a transfer of your position, and what remedies you have if the company changes direction. If you are the company, we test the milestones against a realistic schedule and confirm that the board's ability to respond to new information is protected. Either side should consider how releases and fee provisions will look to parties who did not sign. In a first meeting we review the term sheet and draft agreement and identify the provisions that would matter most if the deal came under pressure.
