Don’t miss out on news you won’t find anywhere else — get The Memo US and The Memo Europe in your inbox every two weeks.

Leveraged finance documents have begun to include voting caps on lender positions, according to 10 9fin sources and language reviewed by 9fin from a deal that cleared the broadly syndicated loan market.

Voting caps have historically applied to sponsor affiliates to protect lenders from a sponsor’s debt arm acquiring a majority voting position. The technology is now aimed at lenders, and it is being deployed to discourage them from forming cooperation agreements or any one lender from gaining too much leverage in negotiations, sources said.

The strategy is designed to make it at least slightly more difficult for lenders to reach a majority voting share without consent from the sponsor.

Most sources maintained skepticism on wide market acceptance, but noted it has cleared the market multiple times.

“It's a sledgehammer,” one market participant said, referring to a voting cap’s effectiveness in hindering the formation of cooperation groups.

The emergence of so-called co-ops has proven an effective tool for lenders to counter savvy sponsors adept at pitting them against each other during liability management exercises. By discouraging any one particular lender from amassing a large portion of a loan, it could require more lenders’ cooperation to reach a majority share.