Davis Polk partner and Restructuring practice co-head Damian Schaible discussed trends in liability management exercises (LMEs) with 9fin. The article notes that the majority of troubled companies that have initiated LMEs this year turned to their existing lenders to raise new money rather than turning to third-party lenders. However, advisors to companies and sponsors often reach out to existing lenders with the threat of potential third-party proposals.

“So much of the broadly syndicated market has now concentrated in a small handful of institutional investors that sponsors don’t really want to blow up their term loans or secured notes if they don’t have to,” Damian explained.

“They want to maintain that threat. If no one ever does a deal away, it becomes less of a threat against the existing lenders in the next deal,” Damian added.

“LME trends — Creditor-led LMEs dwarf third-party financing deals,” 9fin (October 23, 2024) (subscription required) 

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