State of the Market: The Prevalence (or Lack Thereof) of Xerox Blockers
Ian Feng, J.D.: Senior Covenant Analyst
14 May 2026
- How Xerox-style transactions reshaped market thinking around asset transfers and liability management strategies.
- Why Xerox blockers have not yet gained widespread adoption in new credit agreements.
- How evolving covenant language attempts to address risks linked to joint ventures.
- Where gaps in definitions allow borrowers flexibility in structuring complex transactions.
- What emerging approaches signal about future protections against similar deal structures.
The Bottom Lineâ„¢:
Market participants were alerted by a notable transaction involving joint venture asset transfers. Concerns grew about similar structures enabling flexible liability management strategies.
Observers expected swift adoption of protective language to prevent comparable transaction structures. However, such market-standard protections have developed more slowly than anticipated.
The transaction appeared innovative but reflected a familiar drop-down strategy in structure. It shifted assets to a joint venture, bypassing existing covenant limitations.
Meanwhile, expectations rose that similar structures could emerge across the broader market. Participants began examining how agreements might evolve to address these possibilities.
The analysis reviews evolving approaches to protective language within credit agreements. Therefore, it explores how frequently such provisions appear in current market documentation.
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