Davis Polk partner and Restructuring co-head Damian Schaible was quoted in Bloomberg Law on June being the busiest month for large corporate bankruptcies since March 2021. “In the past, an immediate change in interest rates might have led to a covenant issue — but those covenants don’t exist anymore,” said Damian. “It’s a foreboding effectively, caused by rising interest rates, inflation and supply chain issues.”

As lenders are making preparations for when their borrowers are nearing a tipping point, Damian said, “So far, we have mostly seen an exponential rise in names that holders want to talk about. When all of a sudden debt trades off, portfolio managers holding the debt sensibly want to dust off their understanding of their documents.”

“Big Bankruptcies Pile Up as Grab Bag of Stressors Takes Hold,” Bloomberg Law (July 8, 2022) (subscription required)

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