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The year in liability management exercises (LMEs): Uptiers, dropdowns, and lessons from 2024 

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Summary 

2024 was a landmark year for the world of liability management exercises (LMEs), with major shifts in strategies, regulatory rulings, and market trends reshaping the way organizations and creditors operate. This pivotal discussion, hosted by Jared Muroff (Stressed/Distressed Debt Research Manager) and featuring experts Kevin Eckhardt (Deputy Managing Legal Editor) and Julian Bulaon (Senior Covenants Analyst) from Octus, offers a comprehensive review of the year’s most consequential LME events—and their implications for the future.

Here are the key highlights covered in the webinar:

  • The Rise and Evolution of LMEs: LME volumes grew substantially in 2024, doubling since 2022 and rising another 50% from 2023. However, notable changes included a shift toward less aggressive structures after scrutiny and legal decisions.
  • Key Legal Rulings: The Serta Simmons and Mitel decisions redefine what’s permissible under various debt agreements. The 5th Circuit’s ruling in Serta was particularly impactful, revisiting interpretations of open market purchase language, while the Mitel case reinforced the power of specific contractual terms in exchanges.
  • Aggressive vs. Consensual Transactions: While 2024 began with highly aggressive transactions—some reallocating 100% of value away from certain creditors—there was a notable decline in aggressiveness later in the year, likely driven by legal challenges and feedback from major allocators.
  • Innovative Structures and Pitfalls: The “black hole” loophole used in Del Monte’s dropdown transactions highlighted potential drafting vulnerabilities in debt documents, emphasizing the importance of thorough covenant analysis.

If you’re looking to fully understand the implications of these rulings and shifts in LME strategies, this session is a must-watch. Access the full recording to deep-dive into 2024’s lessons and strategies shaping 2025 and beyond.