Pulse Podcast #16: Lender on Lender: Inside the Legal Arms Race Reshaping Liability Management

In this episode of the ABF Journal Podcast, editor in chief Rita Garwood sits down with two of the leading experts in liability management covenant analysis: Julian Bulaon, head of liability management for Americas Covenants at Octus, and Melissa Kelley, deputy head of the Americas Covenants team and a former LME litigator with nearly a decade of experience in New York and London. Together, they trace the arc of liability management exercises from the shock of Serta Simmons in 2020 — when a bare majority of first-lien lenders used an "open market purchase" loophole to leave the minority holding lien-subordinated, covenant-stripped paper — through the Fifth Circuit's landmark 2024 ruling, and into the current landscape where LME playbooks are evolving faster than the blockers designed to stop them. In this episode:• What Serta Simmons actually did in 2020 — and why it shocked a credit market that thought it had already closed the relevant loophole• How the "open market purchase" exception was used, why the Fifth Circuit rejected Serta's interpretation, and what the ongoing bankruptcy court remand could mean for the entire loan market• Why the Fifth Circuit's decision didn't end non-pro-rata LMEs — it just changed how they're structured, with privately negotiated purchase exceptions and Extend-and-Exchange structures filling the void• What's happening right now at Medical Solutions, SonicWall, and STARS/Lionsgate — and what makes each situation legally distinct• How the market is naming and tracking blockers — from the "Big 3" (Serta, J.Crew, Chewy) to newer additions like Envision, Xerox, and Pluralsight — and why negotiating power, not awareness, determines which protections actually make it into documents• Whether ABL and asset-backed lenders are exposed to LME tactics, and why the Hertz revolver example offers a model for smarter protection• Why Julian thinks 2025 and beyond may be the era of "stochastic lender violence" — punctuated by moments of extreme aggression as the 2028 maturity wall approaches Julian Bulaon is head of liability management for Americas Covenants at Octus, where he focuses on identifying the contractual loopholes that enable LME transactions. Melissa Kelley is deputy head of the Americas Covenants team at Octus and brings nearly a decade of front-line LME litigation experience from both New York and London.