Glenn Agre partner Shai Schmidt recently contributed to a Debtwire article discussing whether liability management exercises (LMEs) are likely to remain prevalent in corporate restructurings this year despite concerns about their long-term effectiveness. As explained in the article, LMEs will continue to be a viable strategy for struggling companies seeking to avoid or delay bankruptcy and retain the sponsor’s equity stake. At the same time, legal and market shifts, including the recent Fifth Circuit ruling in Serta, are reshaping how LMEs are structured, with a push toward broader creditor participation.
Shai explained how the rise of private credit funds has intensified competition among lenders, providing distressed companies with alternative financing options. He noted that “This influx of capital has and will continue to assist companies seeking to delay a bankruptcy filing by refinancing their existing loans. At the same time, it can give companies leverage as they negotiate an out-of-court restructuring with existing lenders by threatening—and sometimes executing—a ‘deal away’ with third-party capital providers.”
Read the full article here.