Do Sponsors Ever Bend the Knee?

This is increasingly rare. Sponsors have gotten very good at pitting lenders against each other and there's structural enhancements that banks have given to sponsors that shift power like net short lender provisions or restrictions on who you might assign the loan to. There's far more examples of creditor-on-creditor violence like the Envision-Amsurg transaction - the one example I have somewhat recently that I think might work is the Serta Simmons priming transaction where Apollo and Angelo Gordon (worth to note AG was the one of the instigators of the Envision transaction and is oh so guilty of doing the same thing in a heartbeat) were primed by Eaton Vance and some other CLOs. Worth noting that recently a judge ruled against Apollo and Angelo Gordon's claim that this is violated the open market purchase provision as Apollo and Angelo Gordon had the opportunity to submit a term sheet for their priming transaction, though not taking away the claim that it violated the covenant of good faith and fair dealing. I guess it isn't the sponsor technically as Advent is the owner of Serta. Probably not what you are looking for, but an example of the lenders winning against the bad guys.

Perhaps a better example is one of these distressed companies that manage to limp along and the sponsor desperately wants to avoid a bankruptcy process. If you steady yourself and reject the uptiering transactions, you can theoretically find yourself in a stub piece of debt maturing way ahead of the other lenders. Often times depending on the size, the easiest thing is for the sponsor to write you a check and you end up exiting at par or close to it while the rest of the lenders continue to squabble with themselves.

But you really aren't seeing loan-to-own transactions and lenders taking something into bankruptcy, wiping out the equity, and selling it later for recovery at par. That happened before the GFC, recoveries were better, but banks have been given away most protections and lenders have been willing to accept that.