The landscape of corporate debt restructuring underwent a significant transformation in 2024. A select group of lawyers and financial advisors orchestrated innovative strategies to navigate the challenges of high interest rates and distressed companies. This article profiles the key figures who redefined the rules of debt management, impacting both private equity firms and debt investors.
The Rise of Liability Management:
Liability management, a specialized area of corporate finance, gained prominence as companies grappled with mounting debt burdens. Tactics like “uptiering,” “drop-downing,” and “double-dipping” emerged as tools to strategically manage assets and liabilities. This shift generated substantial revenue for boutique investment banks like PJT Partners Inc., Evercore Inc., and Lazard Inc., while top lawyers commanded significant hourly rates.
The Architects of Change:
Several individuals played pivotal roles in reshaping debt restructuring:
David Nemecek (Kirkland & Ellis): Nemecek spearheaded the use of complex maneuvers that allowed private equity sponsors to weather financial storms without relinquishing control to creditors. He views these strategies as buying “an option on recovery,” providing companies with valuable time to rebound.
Scott Greenberg (Gibson Dunn & Crutcher): Representing creditors in high-profile cases, Greenberg observed that while large lenders often benefit from negotiated deals, private equity owners ultimately emerge as the biggest winners.
Josh Abramson and Jamie Baird (PJT Partners Inc.): Following in the footsteps of restructuring veteran Steve Zelin, Abramson and Baird implemented innovative deal structures, such as tiered exchanges, which prioritized certain investors over others. They anticipate further evolution in restructuring strategies.
Business people working in office
Tyler Cowan (Lazard Inc.): Cowan, involved in both company and creditor representations, described the evolving landscape of debt restructuring as a continuous “game of whack-a-mole,” requiring constant adaptation to new challenges.
Tom Lauria (White & Case): Lauria played a crucial role in the rise of cooperation agreements among creditors. He argues that while powerful creditor blocs can be effective, employing overly aggressive tactics can be detrimental.
Bill Derrough (Moelis & Co.): Derrough likened complex creditor negotiations to a tense standoff, emphasizing the need for consensus to avoid disastrous outcomes. He oversaw AMC Entertainment Holdings Inc.’s innovative debt restructuring strategy.
Damian Schaible (Davis Polk & Wardwell): Schaible witnessed a shift from bankruptcy proceedings to out-of-court workouts. He highlighted the challenges of balancing the interests of various creditors in complex negotiations.
Jaisohn Im (Akin Gump Strauss Hauer & Feld): Im noted the growing importance of securing broad creditor support for restructuring deals. He cited Apex Tool Group LLC’s case as a potential precursor to a wave of debt reduction strategies among healthier companies.
David Hilty (Houlihan Lokey Inc.): Hilty emphasized the long-term benefits of debt restructuring for creditors, including enhanced protections and reduced risk of future surprises. He highlighted the value of participation in shaping future transactions.
Ryan Preston Dahl (Ropes & Gray): Dahl pointed out that out-of-court workouts, while sometimes unfavorable to lenders, often offer a more cost-effective alternative to lengthy and expensive Chapter 11 bankruptcies. He cited the substantial bankruptcy fees incurred by companies like Rite Aid Corp. and WeWork as examples.
Conclusion:
The individuals profiled in this article represent a driving force behind the transformation of debt restructuring in 2024. Their innovative strategies and relentless pursuit of favorable outcomes for their clients have redefined the rules of engagement in corporate finance, leaving a lasting impact on the financial landscape. The evolution of liability management tactics continues, promising further changes in the dynamics between debtors and creditors.
