Davis Polk Restructuring co-head Damian Schaible and Restructuring partner and head of Liability Management & Special Opportunities Brian Resnick were quoted in Petition on the biggest bankruptcy themes and takeaways of 2023.

Discussing the biggest restructuring theme in 2023, Damian said, “‘The deal away’ — We’ve gotten used to liability management being all the rage for overlevered sponsor portfolio companies. But we used to speak in terms of ‘lenders vs. lenders’ in non-pro rata deals. Enter private credit funds, and we now have ‘lenders vs. the deal away’ in more and more situations. Lenders grouping together to try to offer the sponsor a better deal in terms of cheap liquidity, maturity extensions and — increasingly — discount capture against the specter of a dropdown, double-dip private credit deal…”

Brian said, “Liability management transactions is the obvious call. For cases that do file for chapter 11, we’re seeing an increasing number of mid-market companies (often failed SPACs) filing with 363 sale credit bids instead of going concern reorganizations. With rates going ‘higher for longer,’ and more companies that relied on cheap funding getting stressed, that trend seems likely to continue and even increase.”

Brian noted Purdue as the most impactful restructuring matter of the year. “If third party releases are not available in chapter 11, it will significantly narrow options for distressed companies facing significant tort claims, and would deprive these tort claimants of a vehicle to maximize recoveries and contributions from third parties,” he said.

Damian’s choice for most impactful restructuring was The Boy Scouts of America emerging from bankruptcy. He said, “It’s an incredibly important organization doing significant work for and with children across the economic spectrum. Teaching leadership, self-reliance, organization and character while providing life-changing opportunities to youth across the nation, in particular to under-privileged youth. The horrors of abuse should not be understated or swept under the rug. And the bankruptcy system worked well to provide compensation to the survivors, incentivize real change and radical improvement to facilitate ongoing service to the youth of our nation.”

On the most clever restructuring matter of the year, Brian noted, “The liability management ‘pari plus’ technology deployed in Sabre, which expanded on the At Home double DIP.”

Damian agreed, saying, “I am not sure if it was too clever for its own good, but the At Home ‘double-DIP’ financing deserves a shout-out, as it has become a model we at least talk about a lot in the market now.  It is not clear whether the particular structure will hold up if ever challenged and it used technology that has been around and used for a long time, but it certainly resulted in a lot of attention and focus on similar structures in other deals.”

“BK Pros Weigh In. Part I.,” “BK Pros Weigh In. Part II.,” “BK Pros Weigh In. Part III.,” Petition (December 2023)

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