We bring you another installment of The Next Gen Corner. In his article, Luke Hubbard analyzes how the Anthology bankruptcy became the first major real-world application of the Fifth Circuit’s ConvergeOne decision—and how a small minority creditor, Vector Capital, used that precedent to force its way into a debtor-in-possession (DIP) financing deal from which it had been intentionally excluded. Read on.
The Vector Rebellion: When the Excluded Creditor Fights Back
By Luke Hubbard
So you thought the ConvergeOne ruling was just some theoretical judicial scolding that would fade into the background noise of bankruptcy jurisprudence? Think again. The Anthology case just gave us the first real-world test of what happens when a creditor actually uses Judge Hanen’s new playbook as a weapon, and spoiler alert: it worked.
Vector Capital, an RCF lender holding a modest $7.5 million in claims, scrutinized the Anthology debtors’ $100 million DIP arrangement with their ad hoc term lender partners and said, essentially, “I’ll see your ConvergeOne and raise you a lawsuit.” In March 2025, Anthology tried to draw $100 million on the prepetition revolver. Every RCF lender except Vector funded its ratable share. Vector refused, claiming that Events of Default were continuing and a Material Adverse Effect had occurred, conditions precedent that, if unsatisfied, would excuse funding. Anthology insisted the defaults had been waived and no MAE existed. The dispute was already pending in New York state court.
The Anthology debtors needed $100 million in DIP financing. The structure was a non-pro rata arrangement: the ad hoc group would provide fresh cash, get juicy DIP status with all the priority that entails, and they’d get to roll up $50 million of their existing prepetition debt into the new super-priority DIP loans. And Vector? Vector was explicitly not invited. Despite holding first-out RCF claims, the same type of claim as the ad hoc group, Vector was excluded from participating in the DIP.
Vector’s Argument
On one hand, you’ve got the Fifth Circuit’s ConvergeOne decision saying that the “same class, same treatment” requirement from §1123(a)(4) applies to plan confirmation, and you can squint and argue it should extend to DIP financing too. On the other hand, §364, which actually governs DIP financing, contains no such requirement. Nothing about equal treatment.
So Vector had to get creative. Enter the sub rosa plan argument: Vector claimed the DIP wasn’t only emergency financing at all. It was a disguised reorganization plan that converted prepetition debt into super-priority status, picking winners and losers, all before any formal plan vote. If Vector could convince the court this was a sub rosa plan masquerading as a DIP, then boom, §1123(a)(4)’s equal treatment requirement would apply.
Vector launched a three-pronged assault on the proposed DIP and restructuring support agreement:
Equal Treatment / Sub Rosa Plan: Vector went straight for the jugular; the transaction was an impermissible sub rosa plan disguised as a DIP. By giving the ad hoc group (and only the ad hoc group) the exclusive right to roll up debt, convert claims into super-priority DIP loans, and backstop new money, the debtors were effectively distributing the estate’s value off-plan. The “prize” was the chance to participate in a dramatically higher-recovery tranche.
The Serta Protections (and the Missing DIP Carve-Out): – Vector’s strongest contractual argument rested on the credit agreement’s robust “Serta-style” anti-subordination provisions, language that explicitly prohibited non-pro-rata priming or roll-ups of the term loans without every affected lender’s consent. Crucially, those provisions contained no carve-out for DIP financing. – The debtors and ad hoc group were nonetheless asking the court to bless (i) a $50 million roll-up of existing debt into super-priority DIP and (ii) a priming lien on all collateral, exactly the maneuver the Serta protections were written to block. The Required Lenders (controlled by the ad hoc group) had, of course, consented, but Vector cited Section 1123(a)(4), stating that same treatment should relate to DIP financing.
The Roll-Up Is a “Payment,” Not a “Fee”: Borrowing from a favorable Southern District of Texas precedent, Vector insisted that a roll-up is a dollar-for-dollar payment of prepetition debt, not some innocuous “fee” that can skip the pro rata waterfall. That characterization gave Vector standing to scream that the ad hoc group was being paid ahead of everyone else in direct breach of the credit agreement.
Vector laid out the economics in a way that made the discrimination impossible to ignore. It wasn’t asking for much, just the right to participate proportionally. Vector noted that its participation “would represent approximately $1 million of the $50 million Roll-Up, a modest fraction that would have no material impact on the facility’s economics or timing.”
One. Million. Dollars. Out of a $100 million facility.
The debtors couldn’t even claim that Vector’s participation would be logistically complicated or economically disruptive.
But there’s a wrinkle here that makes Vector’s position both stronger and weaker at the same time. Stronger, because the amount is so trivial that excluding Vector looks petty and vindictive rather than economically necessary. Weaker, because Vector itself created this situation by refusing to fund the prepetition draw. If Vector had funded its ratable share back in March, it would presumably be part of the ad hoc group right now, negotiating the DIP alongside everyone else.
So the question becomes: Is Vector being excluded because it’s a minority lender or because it’s a non-performing minority lender? The debtors would argue it’s the latter, and that there’s a world of difference between discrimination and consequence.
The Debtor’s Impossible Position
And here’s where the ConvergeOne ruling really shows its teeth. The debtors were trapped. If they proceeded with the DIP as structured, Vector would likely sue, and based on recent precedent, Vector would probably prevail.
But if they let Vector in? Well, that’s exactly what happened. The debtors caved. They reached a consensual resolution that allowed Vector to participate on a pro rata basis. According to the amended DIP order, Vector would be “permitted to provide new money term loans on a pro rata basis equal to the amount Vector actually funded under the prepetition superpriority credit agreement” and would receive “a corresponding allocation of rolled-up term loans.”
The final numbers: $702,712.69 in new money term loans and $702,712.69 in rolled-up term loans.
Conclusion
The Anthology saga embodies the ConvergeOne principle in motion, transitioning from theory to practice, and has significant implications. The creditor veto just became real: Any creditor who can credibly cite recent case law now has massive leverage. You can’t just exclude them and hope they go away. If they fight, they’ll win, or at the very least, they’ll delay your process and cost you a fortune in legal fees.
The “you’re too small to matter” defense is dead: The debtors couldn’t even fall back on “your participation is too insignificant.” Vector’s $1 million pro rata share was indeed modest, and that’s precisely why excluding them looked so nakedly discriminatory. If it’s so small, why not just include them?
Prepetition contracts have new teeth: Vector’s strongest argument might have been the contractual rights angle. Bankruptcy is supposed to respect prepetition agreements unless there’s a compelling reason to deviate. Using the DIP to effectively rewrite those pro rata and nonsubordination protections, especially as retaliation for a legitimate contract dispute, is a much harder sell now.
The Anthology case is the ConvergeOne principal’s first real victory lap. A creditor invoked the ruling, the debtor folded, and justice (sort of) prevailed. However, it’s also a warning about what’s to come. Distressed debt investing just became a lot more complicated. Every DIP is now a potential battlefield. Every excluded creditor is now a potential Vector. And every debtor has to ask itself: is it worth the fight, or should we just include them from the start?
Luke Hubbard is a sophomore studying Finance at Fordham University’s Gabelli School of Business.
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