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This Is the Best You’ll Get

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Our take:

It’s Altice and Drahi, so perhaps we shouldn’t be surprised. There was a time when companies engaging in asset transfers and other restructuring maneuvers at least tried to dress them up as efforts to “optimize the capital structure,” “preserve enterprise value,” or “fund future growth initiatives.” The euphemisms mattered because transfers made with the intent to hinder, delay, or defraud creditors can be avoided and recovered for the benefit of creditors. But now we’re apparently dispensing with the euphemisms altogether. When the stated purpose of an asset transfer is to position assets “for anticipated discussions with an investor group holding funded debt obligations,” what exactly are creditors supposed to infer? At some point, the line between aggressive liability management and evidence of intent starts to blur.

A Double Dip Too Far?

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Our Take:

Trinseo’s restructuring is quickly becoming a masterclass in how far modern liability management transactions can go off the rails. Trinseo first utilized a double-dip structure, couple with a drop-down, to enhance recoveries of the preferred lenders. When that transaction failed to plug the hole, Trinseo layered on an additional LME, before ultimately filing a “pre-packaged” chapter 11 case premised on the validity of the underlying transactions.

We hope to finally see a Bankruptcy Court address these highly controversial transactions.

You can can read the excluded lenders opening brief here and our Contributors past commentary here.  The transactions rely on “equity” contributions to the builder basket to increase capacity for the drop-down, a feature that could draw scrutiny from Judge Lopez, who is well known for focusing closely on the precise language of the governing documents, regardless of the practical consequences. If that issue ultimately proves fatal to Trinseo’s restructuring strategy, observers may fairly question the decision to seek refuge in the Southern District of Texas in the first place.

A must-see!

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DIP, Rescue, or Derailment?

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BDC Benchmarking Briefs

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Gatto Speaks Up

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UK Gains Traction as Chpt. 11 Alternative

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The New Chapter 11: Get In, Get Out

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Our Take:

Twenty years ago, Chapter 11 was largely about fixing companies. Today, as Sunny Singh bluntly observes, it is increasingly about exiting bankruptcy as quickly as possible.

Of course, once a company arrives in court post-LME, post-SPV financing and carrying a cap stack that “looks like a maze,” there is often little left to restructure operationally anyway. The real challenge becomes making it through the case before the liquidity runway disappears.

Perhaps most striking is how casually administrative insolvency is now discussed. The idea that large debtors may simply run out of cash mid-bankruptcy once would have been extraordinary. Apparently not anymore.

Yet, the real canary in the coal mine — bankruptcy fees — still has not entered the conversation. But without addressing the impact of fees, it is hard to see how large-scale restructurings can rehabilitate companies as they did in the past.

A United Front Against the Champerty Bill…

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Our Take:

The CRC joins other industry associations in opposing NYS legislation imposing a champerty defense in sovereign debt restructurings.