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Clauses & Controversies
Ep 150 ft. Andrew Kissner
Feb 3, 2025
Andrew Kissner, a partner at Morrison Foerster specializing in sovereign debt and liability management, dives into the murky waters of corporate debt. He sheds light on Liability Management Exercises (LMEs) and their clever loopholes like 'getting J. Screwed.' The conversation navigates through the complexities of sovereign debt restructuring, touching on the impact of court rulings and consent payments. Kissner also discusses how evolving strategies in finance mirror innovations in basketball, revealing the strategic dance between borrowers and lenders.
47:06
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Quick takeaways
- Liability management exercises (LMEs) allow borrowers to exploit loose covenants, generating tension among creditors through complex 'up-tier' transactions.
- The evolving nature of creditor strategies in corporate finance could signal similar aggressive practices emerging in sovereign debt restructurings, raising concerns.
Deep dives
Understanding Liability Management Exercises
Liability management exercises (LMEs) have become a dominant trend in corporate finance, emerging as alternatives to formal bankruptcy proceedings. These exercises allow corporate borrowers to exchange distressed debt trading below par for new debt with better terms, often involving increased collateral or interest rates. This process initially began with simple distressed exchanges but evolved into more complex transactions known as 'up-tier' transactions. In these situations, borrowers offer new loans to specific lenders, allowing them to jump ahead in repayment priority, a dynamic that can create significant tension among different creditor groups.
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Discover
highlights
Listen to the best highlights from the podcasts you love and dive into the full episode