The Insight by Oaktree Capital Navigating LMEs with Armen Panossian, Ronnie Kaplan, and Ross Rosenfelt
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Feb 13, 2025 Join Armen Panossian, Co-CEO and Head of Performing Credit at Oaktree, along with Ronnie Kaplan, a Portfolio Manager for U.S. Senior Loans, and Ross Rosenfelt, a Managing Director and Restructuring Lawyer. They discuss the rising prominence of Liability Management Exercises (LMEs) and their benefits over traditional bankruptcy. The trio delves into the complexities of debt restructuring, uptier transactions, and the delicate balance between lender strategies and borrower assistance, all while navigating a volatile credit landscape.
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LME Popularity
- Liability Management Exercises (LMEs) are increasingly common, outnumbering traditional bankruptcies.
- They're the go-to method for struggling borrowers to restructure debt outside of court.
Chapter 11 Downsides
- Standard Chapter 11 bankruptcies are costly and time-consuming due to legal and advisory fees.
- They often result in a complete loss of equity for the business owners because of the absolute priority rule.
LME Advantages
- LMEs preserve optionality for stakeholders, allowing sponsors and management to potentially retain equity.
- They give companies time to recover, and lenders often benefit from tightened loan documents.