Ad hoc committee
Capital MarketsAn informal group of holders of the same debt that organises, appoints advisers at the company's expense, and negotiates as a bloc.
Also written: ad hoc group, coordinating committee, creditor committee
A dispersed creditor group cannot negotiate. An ad hoc committee is how holders of the same instrument solve that: they organise informally, appoint their own legal and financial advisers, and negotiate as one counterparty. The company almost always agrees to pay those advisers, because a creditor group without advisers cannot approve anything.
Membership carries a trade off around information. A member that wants to see the company's confidential plan signs a non disclosure agreement and goes restricted, meaning it cannot trade the paper until the information is released. Funds whose business is trading often refuse, so a group commonly splits into a restricted core that negotiates and a public wing that does not, with the information cleansed at the end so everyone can trade again.
Members also sign co operation agreements with each other, undertaking not to cut a side deal with the company. That is a direct response to transactions in which a majority group is invited into new money on better terms and the rest of the lenders are left behind.
It is not a statutory body and it does not represent the class. It represents its members, and a committee holding a small fraction of a class has organisation without leverage. What gives a committee power is the proportion of the class its members hold, measured against the majority the process requires.
Worked example
Holders of 60% of a note issue form a committee and the company agrees to pay its advisers, illustratively.
Half of them sign a non disclosure agreement and go restricted so they can see the plan; the rest stay public and keep trading.
The members sign a co operation agreement, so the company cannot buy off one fund with a better offer than the others receive.