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Liability Management Transactions and the Year of the Little Dragon

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Summary 

The webinar “2025 Distressed Crystal Ball,” hosted by Harvard Zhang of Octus, delivers forward-looking insights into liability management (LME) and restructuring trends expected in 2025. With panelists including Kelly Dybala (Sidley Austin), Rachel Murray (Moelis & Company), Evan Lederman (J.F. Lehman & Company), and Jared Muroff (Octus), this session provides a bold analysis of where the market is heading. 

Key predictions include a significant uptick in restructuring volume due to rising interest expenses, with companies pursuing creative liability management strategies. Panelists discuss the implications of pro-rata-ish LME structures aimed at preventing litigation, the increasing complexity of credit agreements in light of rulings like Serta, and the importance of flexibility to avoid chapter 11 filings. 

Top insights from the discussion include:

  1. Creativity as the Name of the Game: Panelists agreed that tailored transactions featuring tiering structures and non-pro-rata mechanisms will dominate 2025 as companies prioritize avoiding bankruptcy court. 
  2. The Impact of Rising Rates: Companies heavily reliant on debt raised in low-rate environments are increasingly under pressure, leading to a surge in LMEs designed to manage unsustainable capital structures. 
  3. Document Tightening Post-LMEs: Credit agreements are expected to evolve with tighter provisions post-LMEs, but the panel highlighted that loopholes will remain, opening the door for further innovations. 
  4. Globalization of LMEs: Experts explored the potential for U.S.-style LME frameworks to expand globally, with Europe anticipated to experience increased activity in 2025. 
  5. Operational Challenges Overshadowed by Financial Engineering: The focus on balance-sheet fixes rather than operational turnarounds risks leaving companies vulnerable to recurring distress. 

This engaging webinar leaves no stone unturned—from macroeconomic factors like rate hikes to industry-specific case studies—empowering you to prepare for the challenges and opportunities ahead. For deeper insights into liability management strategies, watch the full replay.