The state of the restructuring market and future outlook with Kirkland and Ellis
Jun 24, 2024
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Kon Asimacopoulos, Sean Lacey, Hannah Crawford, and Kate Stephenson from Kirkland delve into the intricacies of the restructuring market. They discuss how steady default rates and inflation are shaping financial conditions, leading to increased restructuring activities. The team covers strategies for navigating complex negotiations among creditors and the rise of parallel restructuring processes, highlighting recent legal judgments that are redefining the landscape. Their insights reveal an evolving market full of challenges and innovative solutions.
The European restructuring market faces ongoing pressures from inflation, necessitating tailored strategies for companies managing liquidity and maturity challenges.
Judicial rulings are increasing scrutiny on restructuring plans, prompting a shift towards out-of-court solutions amidst evolving legal frameworks and complexities.
Deep dives
Current State of the European Restructuring Market
The European restructuring market is experiencing steady stress and distress, primarily due to persistent inflation and low growth rates. Despite a decrease from recent highs, default rates remain elevated, making it essential for companies to seek assistance in managing their liquidity and maturity profiles. The restructuring team has noted an uptick in client engagements, ranging from comprehensive financial restructurings to specialized financing solutions. This climate indicates that organizations need to develop tailored strategies that reflect the complexities of their current financial situations.
Innovative Approaches to Restructuring Processes
Parallel processes have emerged as a necessary tool for achieving successful restructurings, aiding in the navigation of jurisdictional complexities. Specific examples, such as the parallel running of Italian and UK restructuring plans, illustrate the need to address various legal frameworks to effectively compromise liabilities across different entities. Challenges associated with these parallel procedures include different voting thresholds, timelines, and potential divergent valuations, which can add layers of difficulty to comprehensive restructuring solutions. Embracing innovation within these structures is indicative of a pragmatic approach to resolving complex financial scenarios.
Legal Developments and Future Expectations
Recent significant judicial decisions in restructuring cases have heightened the scrutiny around cramdown provisions, equity retention, and the overall approach towards restructuring plans. These rulings underscore the courts' growing engagement with commercial realities, which leads to increased costs and complexities during restructuring efforts. As the market braces for further developments, there is an anticipated shift towards greater use of out-of-court solutions, with advisors expected to leverage a comprehensive set of options to optimize outcomes. Legal and regulatory changes on the horizon, particularly regarding EU insolvency laws, suggest that the restructuring landscape may continue to evolve significantly in the coming years.
On this episode Debtwire's Senior Legal Analyst Dawn Grocock speaks with Kirkland's Kon Asimacopoulos, Sean Lacey, Hannah Crawford and Kate Stephenson about the state of the restructuring market, the latest on UK restructuring plans, and where the Kirkland team see the market heading.
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