Documentation to Distress: LMT Insights with Anchorage Capital's Kim

Season 2, Episode 6

On this episode of LFI Levered Lines, host Steve Miller speaks with Soo Kim, Partner at Anchorage Capital Advisors leading the firm's global performing credit business and CLO platform, about Liability Management Transactions reshaping the leveraged loan market. Soo contrasts traditional payment defaults from prior cycles (2001, 2008-09, COVID-19) with today's "premeditated orchestrated defaults" designed to provide liquidity and deleveraging. She explains how the 2021-2022 era—characterized by low rates, elevated valuations, and frenzied LBO activity—collided with rapid rate increases to create over-levered balance sheets requiring restructuring.

The conversation explores various LMT structures (up-tiers, drop-downs, double-dips), the critical importance of documentation features like voting rights thresholds, and which constituencies benefit most. Soo shares practical insights on positioning strategies, noting that selling 12-18 months ahead typically preserves the most value, and discusses how LMTs are reshaping assumptions around default rates, recovery rates, and CLO modeling for the leveraged finance market.