One of the most significant developments in the distressed debt market during the past fifteen years has been the increasing use of restructuring support agreements (“RSA”s). An RSA memorializes the support by creditors of the terms of a recapitalization prior to a company entering Chapter 11, including the terms and conditions of the creditors’ and debtors’ obligation to support the Chapter 11 plan. The debtor receives a number of benefits from an RSA, including reducing uncertainty in creditor response to a proposed plan of reorganization, providing momentum for the debtor to negotiate the plan, and reducing the amount of time a company remains in Chapter 11. Creditors also receive certain key benefits, including setting milestones for confirmation and receiving reimbursement for the time and expense of negotiating the transaction.
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