2025 (including the last day of 2024!) featured a flurry of seemingly seminal court decisions—from Serta and Mitel to ConvergeOne, Incora I, and its sequel, Incora II. We also saw the continued evolution of liability management exercises during 2025, ranging from the aggressive playbook of Tropicana to the more measured approach in Constellium. Are we seeing coherent themes emerge—or is this simply a Rorschach test where everyone is left guessing what the crystal ball holds?

To help make sense of it all, we asked Kevin Eckhardt (Octus), Mark Lightner (CreditSights), Kyle Lonergan (McKool Smith), Jim Millar (Faegre Drinker), Daniel Shamah (Cooley) and Cliff White to peer into that crystal ball.

Question #1: After Serta and Better Health, did 2025 meaningfully reset the rules on liability management?

• Jim Millar: No. There will be a non-stop effort by companies and majority holders to look for opportunities to take value from minority holders that aren’t at the table. If one version of an LME hits a roadblock, they’ll just look for others.

• Kevin Eckhardt: No. Serta is already well on its way to being neutered as precedent. At most, it gives creative finance lawyers enough guidance to get around its limitations. Majorities will keep pushing the envelope, and I’m not optimistic that courts, especially bankruptcy courts, will fight back if it means blowing up capital structures during Chapter 11, à la Incora/Wesco I.

• Daniel Shamah: By the time the Fifth Circuit’s Serta opinion came down, reliance on open-market purchases for exclusive deals had largely faded. Judge Crane’s rejection of collapsing as a way to challenge an LME is likely to have the more lasting impact.

• Mark Lightner: No. What we learned is that the words of the debt instruments matter—and courts will enforce them as written.

Question #2: Does the future point toward broader inclusion—or outright prohibition—of cooperation agreements in light of challenges in Selecta and Altice USA?

• Daniel Shamah: I don’t see those lawsuits slowing down cooperation agreements.

• Mark Lightner: It’s difficult to say, but market chatter suggests Selecta and Altice USA won’t be isolated cases. Until a definitive line is drawn, the primary beneficiaries may simply be antitrust lawyers.

• Kevin Eckhardt: The antitrust arguments in Selecta and Altice are ridiculous. The idea that a borrower has a Sherman Act right to negotiate financing with its existing lenders as a “market” is nonsense. That doesn’t mean the arguments won’t work, but until a court says otherwise, common sense applies. Cooperation agreements are legally fine, but I doubt they’ll ever be widespread. Everyone assumes they’ll be at the cool kids’ table when things go bad—why limit options? If lenders want enforceable “play nice” obligations, they should put them in the credit agreement itself.

Question #3: Does ConvergeOne’s rejection of a non-pro rata rights offering signal heightened scrutiny of non-pro rata DIPs and exclusive investment opportunities?

• Jim Millar: Yes. Courts are realizing that non-pro rata investment opportunities are just another way of favoring some creditors at the expense of others.

• Daniel Shamah: Not outside the plan context, and not at the bankruptcy court level. There’s no analogue to §1123(a)(4) in the DIP context. Bankruptcy courts will likely continue approving non-pro rata DIPs to keep cases moving, and intercreditor disputes can be litigated elsewhere. Whether appellate courts agree remains to be seen.

• Kevin Eckhardt: Heightened scrutiny in theory, but not in practice. Until judges in big-case venues understand that these “goodies” are rarely necessary to induce DIP lending, they’ll keep approving them. Judges approved nondebtor releases for decades despite claiming they were “extraordinary.” This isn’t the Supreme Court.

• Mark Lightner: It’s a stretch to extend ConvergeOne’s reasoning to impose pro rata DIP requirements.

Question #4: Do the reversals in Incora, Sanchez, and ConvergeOne suggest greater certainty—or greater volatility—in the SDTX?

• Jim Millar: Greater certainty. These cases put up guardrails that should be respected in the near term.

• Kevin Eckhardt: The Fifth Circuit is on a rampage, but I don’t expect it to last. Houston remains the venue of choice for sketchy relief. Delaware and New York are effectively dead, and unless another district steps up, Houston is it. Your move, Idaho.

• Daniel Shamah: Each case stands on its own and reflects a reaction to the idiosyncratic rulings of a former judge. I see more stability now, which should increase predictability both at the trial and appellate levels.

• Mark Lightner: More volatility—but also a reminder that Article III judges in the Fifth Circuit won’t hesitate to flex their appellate muscle.

Question #5: Should we welcome the rapid expansion of asset-based lending by non-regulated private players—or are we sowing the seeds of the next financial dislocation?

• Daniel Shamah: Too early to tell. But I predict one or two big implosions will lead to a booming cottage industry of think pieces on private credit.

• Jim Millar: I’m not convinced it’s either. It’s just another way of putting money to work—not all that earthshattering.

• Mark Lightner: Private ABL offers liquidity and diversification, but capital inflows may weaken underwriting. While some stress is inevitable, systemic dislocation seems unlikely.

Question #6: Did 2025 clarify when a dropdown or uptier crosses the line into inequitable conduct—or make those boundaries murkier?

• Kevin Eckhardt: Murkier. We still don’t know how bankruptcy judges will work around Serta, and 2025 didn’t give us many boundary-testing cases.

• Jim Millar: We got some data points, but outcomes will continue to turn on evolving document language.

• Mark Lightner: No real clarity. Litigation is needed, but settlements may prevent meaningful creditor protections.

Question #7: Has the line between distressed funds and opportunistic private credit effectively dissolved?

• Jim Millar: There’s overlap, but they still see themselves as distinct.

• Mark Lightner: The line is blurry, not gone. Private credit can handle amendments and extensions, but true distress still favors traditional distressed investors.

• Kevin Eckhardt: There never was a difference. “Private credit” is marketing jargon.

Question #8: What single restructuring trend from 2025 is most likely to define 2026?

• Mark Lightner: Chapter 11 is not dead.

• Jim Millar: More attempts to restructure outside Chapter 11—unclear how successful they’ll be.

• Kevin Eckhardt: Exhaustion with bankruptcy costs and dysfunction will push parties toward UK schemes, LMEs, and liquidations. The Code needs reform, but it won’t happen.

• Daniel Shamah: Intensifying talent wars as advisor consolidation accelerates—the gap between haves and have-nots will widen.

• Kyle Lonergan: Increasing complexity in DIP structures alongside sustained elevated commercial filings, offset by growing efforts to avoid in-court restructurings.

Question #9: What question did we forget to ask as we look ahead into 2026?

• Jim Millar: How much have professional fees influenced companies’ restructuring choices?

• Cliff White: Two broader issues:

1. Chapter 11 filings continue to rise, while Chapter 15 filings are sharply down—an interesting divergence.

2. Allegations of fraud are appearing more frequently, as seen in Tricolor and First Brands. History suggests more “cockroaches” may emerge.

Question #10: And finally—pick your poison: what should we call an LME that ends in Chapter 11?

• Jim Millar: A “LiME Squeeze.”

• Daniel Shamah: A WLME—We Liabilitied Our Way into an Eleven.

• Mark Lightner: “L’Me File” (pronounced “Lemme File”).

• Kevin Eckhardt: A failed outdoor PET becomes a “Neutered PET.”

• Cliff White: “A Win for the Professionals”—or “The Ultimate Double-Dip.”

Copyright 2025 Creditor Coalition