LMEs: The New Trend for Financial Restructuring Outside of Court

A major trend has emerged in credit markets over the past few years: liability management exercises (LMEs), an alternative to traditional bankruptcy proceedings for financially distressed companies. LMEs, including strategies such as drop-down financing, up tier priming, and double-dip transactions, allow companies to extend debt maturities and restructure outside of court. While LMEs can postpone bankruptcy, they rarely address underlying financial challenges, often leading to eventual default and potential harm to unsecured creditors.

A&M's Unsecured Creditors’ Committee practice Managing Director Rich Newman and Director Conrad Ragan were recently featured in The Credit and Financial Management Review. In the article, they explore the impact of LMEs on credit markets, including increased litigation, risks to creditors, and market distortions. They also provide guidance on mitigating risks in LME transactions and emphasize the importance of monitoring trends and maintaining robust credit risk management practices.

Read the Full Article