Uptier transactions under Swedish law: Lessons from abroad

The recent Serta and Mitel cases in the U.S. have become defining precedents on the contractual mechanics of these transactions, while the U.K. has begun to develop its own fairness-focused framework.

The Swedish picture is less clear in terms of emerging case law but there has been an uptick in the number of uptier transactions in recent years and Swedish law’s focus on equal-treatment and creditor-protection principles makes it probable that uptier transactions will be subjected to greater scrutiny.

Uptier mechanics and key Swedish law considerations

An uptier transaction amends restrictive terms—typically with the consent of a supermajority of bondholders or lenders—to:

• to issue new, super-priority debt; or
• to exchange existing debt for a higher-ranking tranche of debt. 

Non-participants are structurally subordinated, which effectively raises the same concerns which are raised in a hive-down transaction. Key Swedish law touchpoints include:

1. Equal treatment rules – Chapter 18, Section 3 LVPM (implementing the Transparency Directive) requires equal treatment of debt instruments issued on the same terms, though whether this confers substantive rights or only disclosure obligations remains unsettled.
2. Market practice – The Swedish Securities Market Association’s Model Terms enshrine pari passu treatment and supermajority voting thresholds but do not directly address uptiers.
3. Companies Act limits – Value transfer and financial assistance restrictions can curtail the use of collateral or guarantees to support new senior debt.
4. Claw-back risk – Under the Bankruptcy Act, new security or altered ranking granted shortly before insolvency may be unwound during the hardening period.

These constraints raise a number of questions: how far can a majority amend terms for its own benefit without breaching Swedish equal-treatment or creditor-protection principles? And if a claw-back later occurs, how will it work in practice?

International Case Law on Uptier Transactions

1. Serta Simmons Bedding (U.S. Fifth Circuit Court of Appeals, 2024)

The majority lenders cooperated with Serta to create super-priority debt by through an “open market purchase” exception to pro-rata sharing.
However, the Fifth Circuit reversed the lower courts, holding the transaction was not an “open market purchase” because it was a privately negotiated exchange rather than a true market purchase on the secondary market.
As a result, going forward uptiers in the US cannot solely rely on generic “open market” clauses to justify non-pro-rata deals absent further contractual language.

2. Mitel Networks (New York Appellate Division, 2025)

The majority lenders used the credit agreement’s “purchases” exception to implement an uptier which was challenged by the minority creditors, in part due to the cashless rollover of existing debt for new higher priority debt. The New York court dismissed minority lender claims because the agreement permitted purchases “by assignment,” and did not require cash consideration; debt-for-debt was a valid “purchase.” In New York at least cashless rollover purchases are likely to be permitted if no more specific language prohibits them.

The Developing U.K. Perspective: Fairness and Abuse Principles Apply

While English-law loans often contain similar open-market purchase clauses, no U.K. court has yet ruled on whether a bespoke uptier exchange qualifies. Recent cases have invalidated coercive exit consents, upheld majority decisions that have been found to be for the benefit of all creditors, and generally emphasised fairness and restraint on the abuse of majority creditor power.

Implications for Swedish Bond and Loan Markets

If an uptier transaction is to be permitted it is important that the drafting of the underlying loan documentation permits the mechanics of the uptier itself and aligns with the equal treatment of creditor principles of Swedish law

In order to comply with these principles one should be careful with incentivising early participation (via early-bird or consent fees) since there is a risk breaching Swedish equal-treatment principles. If such actions are being contemplated the underlying contracts should clarify whether such payments are permitted.

It is important to note that as with hive-downs there is a clawback risk and hardening period applicable to uptiers implemented shortly before insolvency. These transactions can be subject to new hardening periods and can be reversed if found to favour some creditors at others’ expense. With regard to how clawback would work in practice, it would most likely become complex. It is still uncertain how this would function but the available paths focus on (i) unwinding of the transaction through cancellation of the new debt and ranking, (ii) distributing the insolvency proceeds in accordance with the pre-uptier rankings, and (iii) assessing damages but it is unclear how damages would be assessed against participating creditors and there would be little to no value in assessing them against the insolvent borrower. 

Due to the concerns noted above it is of critical importance that lenders participating in an uptier transaction, either wholly governed by Swedish law or with a Swedish law component, are mindful of the equal treatment of creditors requirements. The international case law points to how critical it is that the drafting of the loan documentation envisions an uptier and properly permits the mechanics of one. Such careful drafting does not guarantee that an uptier transaction will be upheld under Swedish law but it does provide the best odds of this being the case and also may avoid litigation over vague drafting.

Conclusion

Uptier transactions highlight a balance point between contractual freedom, creditor equality, and restructuring necessity. The U.S. cases of Serta and Mitel show two judicial approaches grounded in the underlying contractual language; the U.K. remains a fairness-based jurisdiction without a direct precedent but with a clear willingness to police coercion.
For Sweden, these developments reinforce the importance of precise drafting and early (and wide) creditor engagement to ensure predictability and fairness while the Swedish market waits for clearer judicial guidance on the viability of uptier transactions.