Repeat Restructurings and Approaching Maturities Could Drive 2027 Activity, Says Jefferies’ Finger

By Priya Batchu

Some companies that completed liability management exercises over the past two years may need another adjustment to their balance sheet or a comprehensive restructuring in 2027. Approaching maturities, including in private credit, could also contribute to activity, according to Jeffrey Finger, managing director and co-head of the U.S. capital structure solutions group at Jefferies.

“We are watching companies that completed liability management exercises over the past two years,” Finger said.

“Some may need another restructuring in 2027, particularly where the earlier transaction did not provide sufficient liquidity or a sustainable capital structure.”

Finger said there continues to be a preference for out-of-court solutions, even though the market has seen fewer LMEs so far this year than in prior years.

“There continues to be a preference to avoid an in-court process, unless chapter 11 offers tools better suited to the company’s needs,” Finger said.

Finger said he is seeing some companies that completed LMEs a couple of years ago require further restructuring, including more comprehensive out-of-court solutions or chapter 11 proceedings.

“Recent research on non-pro-rata LMEs points to a meaningful incidence of subsequent restructuring,” Finger said. “The broader lesson is that extending maturities alone may not be enough if a company also needs liquidity, deleveraging or operating improvements.”

Whether an LME or amend-and-extend addresses a company’s financial needs depends on whether the company requires additional time, liquidity or debt reduction, according to Finger. Operating problems may also require separate corrective action.

“Sometimes a transaction does not provide enough time or supplemental liquidity,” Finger said. “Maturity relief should be evaluated alongside liquidity needs and debt reduction, rather than addressing those issues only after an extension.”

Finger also pointed to negotiations over how additional capital is funded, noting that some deals have paired sponsor contributions with new money from lenders. “When lenders provide additional runway, they may seek sponsor support as part of the solution,” he said.

Where lenders agree to extend maturities rather than pursue a change of ownership, the allocation of contributions depends on the company’s needs and the negotiated transaction, Finger said.

Market participants are also trying to avoid the complicated, multi-layered capital structures that earlier rounds of restructuring left behind, according to Finger.

“The objective should be the simplest structure that addresses the company’s needs,” Finger said.

Overly complicated structures can make a future transaction difficult to execute, though some LMEs have been designed to accommodate subsequent transactions, Finger said. Avoiding complexity will not always be possible.

“In some situations, additional structural complexity may be necessary to align incentives and achieve a workable transaction, but it should serve a clear purpose rather than create another obstacle to a future restructuring,” Finger said.

Looking at the next 12 to 18 months, Finger expects healthcare to remain an area of elevated restructuring activity. He pointed to labor shortages, rising labor costs, staffing services and reimbursement risk as points of uncertainty.

Finger also highlighted leverage that accumulated during the period of low base rates, when a wave of rollups swept the physician practice management sector.

“In some physician practice management platforms, anticipated synergies and growth have not materialized,” Finger said. “Combined with borrowing costs above the low-rate financing period, that can leave businesses with more leverage than their cash flows can support.”

For some stressed but viable businesses, Finger sees a path to refinance by pairing a sustainable level of senior debt with structured or hybrid junior capital, such as preferred equity, noting that a number of funds have been raised to do just that.

“For some stressed but viable businesses, refinancing may be achievable by combining a sustainable level of senior debt with preferred equity or other junior capital,” Finger said. “That can bridge a financing gap, provided the business has sufficient enterprise value and cash-flow capacity to support the overall structure.”

That opportunity may be relevant for some software businesses with first lien / second lien or first lien / unsecured structures, where hybrid capital could help bridge a refinancing gap. Its viability depends on valuation and the business’s ability to support the resulting capital structure, according to Finger.

Broadly speaking, Finger traced much of the current opportunity set to financing raised in the years following Covid, when base rates were quite low. Borrowers having to refinance that debt must assess financing costs and debt capacity under current market conditions.

“For a business whose earnings have not grown sufficiently, higher borrowing costs can reduce the amount of debt it can sustainably support relative to the low-rate financing period,” Finger said.

Cost inflation is also compressing margins across a number of sectors, Finger said, pointing to materials costs in industrials that some companies can pass through to customers while others cannot. Supply-chain stress and tariffs are contributing in certain areas, he added.

“Where reported earnings benefit from nonrecurring tariff refunds, we would distinguish that benefit from underlying operating performance,” Finger said. “We would separately assess the timing and liquidity impact of any cash receipts.”

“Ultimately, for the reasons above, companies are facing a significantly different capital market environment to refinance 2028 and 2029 maturities, which could lead to increased liability management activity. We believe that the best solutions will likely involve a combination of strategies, not just LME playing creditors against each other,” Finger said.
 

CoreWeave and the AI Trade

Elevated market volatility driven by inflation fears has put a damper on leveraged finance participants’ view of AI infrastructure credit despite the sector seeing an influx of deals hitting the high-yield primary market so far this year. While AI infrastructure and data center buildout-related deals in the primary market have been in great demand lately, market participants say that recent volatility has driven more dispersion than expected. Credits in the secondary market such as Coreweave have felt the greatest pain. The AI cloud infrastructure provider’s unsecured notes traded into distressed territory on Oct. 14 and Oct. 15, with three of its four dollar-denominated notes at spreads above 1,000 bps and some issues at or below 80 cents. The notes lost about 4 points on Oct. 14 and about 3 more on Oct. 15, and the stock fell roughly 15.5% on Oct. 14. Current trading levels price in roughly even odds of a bankruptcy event, and stress is spreading to data center bonds such as Zenith Arc and Galaxy Helios. Octus’ coverage of CoreWeave is HERE.
 

LoanDepot and JetBlue Secondary Trading

Rising interest rates and oil prices are exerting pressure on high-yield credits, causing distress in the debt prices of companies such as JetBlue and LoanDepot. Inflationary pressures have weakened the consumer sector outlook, while higher rates have negatively impacted sectors that are reliant on stable rates, such as mortgage REITs. JetBlue’s debt has slipped into distressed trading levels due to increased fuel costs, despite its projections for revenue growth, while its stock has declined significantly. Meanwhile, LoanDepot is evaluating options for upcoming bond maturities as mortgage rates rise and borrower activity slows, affecting its capital structure. Octus’ coverage of LoanDepot is HERE, and coverage of JetBlue is HERE.

S&S Activewear

The CD&R-backed apparel firm reported preliminary third-quarter results noting its expectation that sales will fall 8.5% year over year while EBITDA will be down about 11%, which could put its refinancing efforts at risk. Liquidity is expected at $730 million including $60 million of cash, with leverage currently standing at 5.4x. The company is working with UBS to sound out investors for a refinancing of its $750 million term loan due March 2028, and its 8.375% senior secured notes due 2031 fell to 88.5 from the mid-90s in mid-September. Octus’ coverage of S&S Activewear is HERE.
 

Cogent Communications

Holders of Cogent Communications’ 6.5% senior secured notes due 2032 are advised by White & Case and Ducera Partners, while holders of the 7% senior unsecured bonds due June 2027 are working with Akin Gump and Houlihan Lokey. The company is being advised by Evercore amid its refinancing challenges and performance pressures. Octus’ coverage of Cogent Communications is HERE.

Gulfeagle Supply

An ad hoc lender group of lenders to the roofing materials distributor is working with Gibson Dunn as the company must raise capital or refinance its revolver before a forbearance agreement expires Dec. 3. The company entered a forbearance period after it recently breached a covenant and also downsized its revolver to $120 million from $150 million, with $80 million drawn. Second-quarter adjusted EBITDA fell 26.5% year over year to $25 million on a 7.5% revenue decline to $375 million. Octus’ coverage of Gulfeagle Supply is HERE.

The Children’s Place

The children’s clothing retailer is exploring strategic alternatives including a potential chapter 11 filing, working with White & Case as legal advisor and BRG as financial advisor. No decision has been made, and the situation remains fluid as the company faces a diminishing liquidity profile and worsening sales. The company recently drew the remaining $25 million on a $40 million loan from Mithaq Capital. In the second quarter, which ended Aug. 1, sales fell 18.9% year over year to $241.8 million while liquidity ended the quarter at $79.7 million and total debt stood at $371.2 million as of Aug. 1. Octus’ coverage of The Children’s Place is HERE.

Dave & Buster’s

The publicly listed entertainment and dining chain is working with Kirkland & Ellis to evaluate options for its capital structure, including a liability management exercise, as its revenue declines amid higher inflation. An ad hoc lender group is advised by Gibson Dunn as legal counsel and PJT Partners as financial advisor. The company has been wrestling with negative same-store sales and low consumer traffic as consumers struggle with persistent inflation. Second-quarter adjusted EBITDA fell 24% year over year to $98.9 million on a 2.4% revenue decline to $544.1 million amid weak traffic. Octus’ coverage of Dave & Buster’s is HERE.

Springs Window Fashions

Certain creditors of the Clearlake Capital Group-backed window coverings maker are forming an ad hoc group with the law firm Hogan Lovells Cadwalader as the company contends with persistent end-market weakness and weakening liquidity. Larger debtholders in the company’s capital structure are organizing their own majority group. The company is working with Simpson Thacher, Centerview Partners and Alvarez & Marsal ahead of possible second-step conversations with creditors. S&P Global Ratings recently downgraded the company to CCC with a negative outlook, citing leverage above 25x, $21 million of cash, an expected free operating cash flow deficit above $80 million and an ABL and revolver that turn current in July 2027. Octus’ coverage of Springs Window Fashions is HERE.
 

Genesis Healthcare

Judge Stacey G.C. Jernigan confirmed Genesis Healthcare’s chapter 11 plan at an uncontested hearing Wednesday, as the debtors’ $966 million all-asset sale to 101 West State Street, or WSSH, closed during the hearing.

WSSH won the debtors’ second auction in January. Genesis then entered a settlement with the official committee of unsecured creditors and other key parties. The deal cancels more than $430 million of insider debt and delivers $150 million of value to the liquidation trust.
The plan went effective for two debtors once the sale closed. Octus’ Genesis Healthcare coverage is HERE.

LIV Golf

Judge Michael B. Kaplan approved the LIV Golf debtors’ DIP financing on a final basis Wednesday, along with their motion to assume an amended restructuring support agreement with sponsor BC Partners Advisors. The hearing was uncontested, though the official committee of unsecured creditors said in a statement that it does not support the RSA transactions.

The DIP financing consists of a $49.6 million new-money DIP facility from secured lender and equity owner Saudi Arabia’s Public Investment Fund, or PIF, upsized with a $4 million participation from BC Partners in lieu of the standalone DIP BC Partners initially announced.

The debtors filed for bankruptcy on Sept. 8 with an RSA to recapitalize and pursue a “player-first ownership model” called LIV 2.0, backed by a $300 million investment from BC in loans and equity. LIV amended the RSA on Oct. 5 to push back interim deadlines and establish a process for players and minority investors to join the deal. On Wednesday, counsel pointed out that the RSA still contemplates additional funding from BC to fund LIV 2.0 above the $4 million DIP participation. Octus’ LIV Golf coverage is HERE.
 

Cable One, Mega Broadband Put Obligation Litigation

A New York federal court on Oct. 9 temporarily halted Cable One from satisfying its $480 million put obligation to acquire the remaining 55% of Mega Broadband it does not already own. CoBank, which says it holds $1.1 billion in outstanding secured Cable One loans, argues the Mega Broadband transaction amounts to a fraudulent transfer that would cause Cable One to “sink deeper into insolvency.” Cable One subsequently asked the court to dissolve the TRO, contending that CoBank is trying to “torpedo” Cable One’s agreement in principle on a refinancing deal with a lender group led by GTCR. The court set an Oct. 22 hearing to determine whether to maintain or dissolve the TRO. Octus’ coverage of Cable One is HERE.

Altice International Litigation

A group of Altice International secured lenders and noteholders on Oct. 13 sued the company and several affiliates in New York state court alleging they “fraudulently transferred billions in value” to entities affiliated with controlling shareholder Patrick Drahi to avoid paying more than $11 billion in funded debt. The allegations against Drahi and Altice International resemble those made by Optimum Communications (fka Altice USA) lenders in a separate Sept. 28 complaint. Octus’ coverage of Altice International is HERE.

Corteva Spinoff Fraudulent Transfer Litigation

An Indiana federal court briefly halted Corteva and its spun-off seed business, Vylor, from issuing dividends and conducting share buybacks. The court on Oct. 9 found that a multistate coalition is likely to succeed on its claim that the spinoff was a fraudulent transfer that rendered Corteva insolvent and unable to satisfy potentially tens of billions of dollars’ worth of legacy PFAS liabilities. However, the court on Oct. 10 granted the companies’ request to stay the effectiveness of the temporary restraining order pending the companies’ emergency appeal to the U.S. Court of Appeals for the Seventh Circuit. Octus’ coverage of Corteva is HERE.