Davis Polk partner and Restructuring co-head Damian Schaible was quoted in Bloomberg discussing the stressed credit market. A prolonged downturn could herald a resurgence of old restructuring standbys like classic debt-for-equity swaps and even Chapter 11 filings, he said.

“If the Fed doesn’t act forcefully, we may see depressed trading prices and wider spreads between market interest rates and trading prices,” Damian said.

He continued, credit investors “hate to see their debt holdings trade lower. But for borrowers, that presents a ready-made haircut. Issuers can lower their debt burdens by swapping those now-discounted obligations for new, different ones or restructuring them in some other way.”

“Credit Market Stress is Fuel for Lender Fights,” Bloomberg (August 6, 2024) (subscription required)

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