Liability Management Transactions - Summary Overview

Liability management transactions (LMTs) involve transactions that enable an issuer to refinance or restructure its existing obligations, often involving incumbent or new lenders to achieve financial flexibility and potentially avoid bankruptcy. Three main types include drop down transactions where assets are moved to new indebtedness, up-tearing transactions that prioritize participating lenders in a new financing structure, and double-dip transactions where lenders establish multiple claims against a borrower group by structuring intercompany receivable pledges and guarantees for potential recovery in bankruptcy scenarios.