InsuranceAUM.com Episode 321: The Rise of Liability Management Exercises: The Changing Face of Restructurings with Oaktree’s Ross Rosenfelt
Sep 18, 2025
Ross Rosenfelt, Managing Director at Oaktree, dives into the evolution of liability management exercises (LMEs) and their game-changing effects on credit markets. With a solid background in restructuring, Ross explains how LMEs have shifted the dynamics between distressed companies and creditors. He shares insights on the mechanics of LMEs, the rise in their prevalence due to market conditions, and the challenges they pose for underwriting. Plus, he highlights the importance of culture and relationships in the investing landscape.
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Shift From Bankruptcy To LMEs
- Restructuring has shifted from bankruptcy-first to out-of-court fixes like LMEs.
- Large-cap issuers now view bankruptcy as a last resort and prefer liability management exercises.
Underwrite For Multi‑Dimensional Risk
- Underwriting must model more variables because LMEs can rapidly change capital structures.
- Assess covenants, sponsor motives, relationships, and position size to anticipate LME outcomes.
LMEs Now Dominate Defaults
- LMEs exploded: 5% of loan-market defaults were LMEs in 2015 versus 73% in 2024.
- LMEs now dominate default dynamics and change expected recovery pathways for creditors.