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 restructuring themes and takeaways of 2024 as well as their predictions for 2025.

Discussing the biggest restructuring theme in 2024, Damian said, “Liability Management 2.0 — Gone are the days of the ‘left behind’ non pro rata deal. Like a troublesome toddler who grows into a precocious and crafty pre-teen, LM has grown up from its litigious and messy roots to become more strategic and organized (but no less problematic). The transactions are almost always driven opportunistically by sponsors and the non pro rata elements (differential economics and exchange ratios) are designed to coerce full participation and avoid litigation.”

Damian added that he predicts post liability management restructurings will be the biggest theme of 2025. “I am working on 6 of them right now in various stages and expect more to come. It turns out when you effectively just add leverage and interest expense it doesn’t always help,” he explained. He added that he thinks that the rate of liability management will increase or remain steady. “Technology and deal dynamics will continue to evolve to permit even greater differential spreads between majority and minority creditors until (hopefully) creditors just get tired of it and coop up broadly and dare the sponsors to light money on fire with the deal away.”

Brian noted that he thinks lower interest rates and less regulatory oversight will lead to increased distressed M&A activity and 363 sales in 2025. He also expects a similar rate of liability management transactions “but with expanding creativity and complexity, and an increasing amount of ‘dips’.”

When asked what would be his selection for the most impactful restructuring matter of the year, Brian said, “Purdue for another year. Market is watching to see what comes next for resolving mega mass tort situations.”

Damian’s choice for most impactful restructuring was Pluralsight. “Liability management (lite) enters the private credit market to much fear and trembling in the market.”

As for the biggest winner of the year, Brian said it would have to be the Delaware bankruptcy bench. “Chapter 11 mega cases are coming back home,” he noted.

Outside of the U.S., Damian said he expects to see distress in Europe next year. “I keep feeling like we are playing piano on the deck of the Titanic over here in the US while the world very unfortunately burns around us (how is that for mixed metaphors?). Ukraine, Israel, energy transition issues, inflation, costs, China, Korea, tariffs to come, it goes on and on and presumably starts to really impact Europe even as it all starts to come for us.”

When asked which industry in the U.S. will see the most distress in 2025, Damian said, “Retailers. A lot of them have scraped through but are getting weaker and consumer sentiment and spending will fail to support them as things feel choppier by second half of 2025.”

Brian agreed, adding that “Retail woes continue; potential supply chain disruption and tariffs will lead to some net losers.”

“RX Pros Weigh In. Part I.,” “RX Pros Weigh In. Part II.,” Petition (December 2024)

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