FICC Focus
Davis Polk’s Tsiouris on Next LME Act: State of Distressed Debt
Apr 16, 2025
Natasha Tsiouris, a partner at Davis Polk & Wardwell LLP, discusses the dynamic world of distressed debt, focusing on creditor-side strategies. She highlights the shift in liability management transactions and the growing need for lender consensus to minimize litigation risks. Tsiouris emphasizes the importance of prompt negotiations among creditors to avoid chaos. Plus, she shares insights on private credit restructurings and anticipates evolving trends, including the rise of flexible 'deal away' strategies that could reshape the landscape.
27:38
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Quick takeaways
- The evolution of liability management transactions from 1.0 to 2.0 emphasizes lender consensus, greatly reducing litigation risks for minority creditors.
- Recent changes in deal documentation allow companies to pursue 'deals away', encouraging lenders to negotiate more favorable terms to retain involvement.
Deep dives
Trends in Liability Management Transactions
Liability management transactions (LMT) have evolved significantly, with a notable shift from 1.0 to 2.0 deals. In the earlier 1.0 deals, majority lenders often executed agreements that excluded minority groups, leading to frequent litigation from those left behind. In contrast, 2.0 deals emphasize consensus, benefiting all parties involved by ensuring that minority lenders receive incentives that discourage litigation. This evolution reflects a broader understanding within the market that fostering cooperation among creditors is vital for smoother transactions and reduced legal risks.
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