September 11, 2025 • 44 mins
Distressed debt exchanges in the form of liability-management exercises are set to take off in Europe, according to Gibson Dunn, the US-based law firm. “You’re getting the same lawyers and bankers hired in Europe for deals that they do here — it’s not surprising that they would potentially roll out a playbook that’s worked,” Scott Greenberg, the firm’s global chair of business restructuring and reorganization, tells Bloomberg News’ James Crombie and Bloomberg Intelligence’s Stephen Flynn in the latest Credit Edge podcast. “It’s a natural progression to take that expertise and bring it to your clients overseas,” says Greenberg, who notes elevated levels of distress in France. We also discuss the likelihood of an imminent US LME revival, the bankruptcy outlook and communications sector stress.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:18):
Hello, and welcome to the Credit Edge, a WEEKI Monkets podcast.
My name is James Grumby. I'm as senior editor at Bloomberg.
Speaker 2 (00:24):
And I'm Steve Flynn. I'm a team leader and senior
credit analyst for Bloomberg Intelligence and I cover the communications sector.
This week, we're very pleased to welcome Scott Greenberg, Global
Chair of the Business Restructuring and Reorganization Practice at Gibson Dunn.
How are you, Scott, I'm good, Thanks for having me in,
Thanks for being here. Scott is a partner in Gibson
(00:44):
Dun's New York office, Global chair of the firm's Business
Restructuring and Reorganization Practice Group and a member of the
firm's executive Committee. Scott focuses on representing debtors and creditors
in court and out of court restructurings. Chambers USA described
Scott as an excellent lawyer and deal maker that is brilliant,
super connected, and great at managing adversaries and clients. Prior
(01:07):
to joining Gibson Dunn, Scott was a partner at Jones
Day from twenty thirteen to twenty nineteen, where he also
served as co head of the Jones Day business restructuring
and reorganization practice. Scott has received numerous awards and accolades
from industry associations and publications, including deal Maker of the
Year from The American Lawyer in twenty twenty one. Scott
has recently represented lenders in a number of large restructurings,
(01:30):
including for Altese France, which was the first large scale
liability management exerciser l and E in Europe, Comscope, and
Diamond Sports Group.
Speaker 1 (01:40):
So thank you, Steve, for as we say every week now.
Credit markets are hot and companies are taking advantage, raising
tens of billions of dollars in new debt over the
last few weeks. There's also more distress. Rates are staying
high for longer than most people had expected. There's a
large pile of debt coming due. At the same time,
Trade wars and a whole load of other US policy
uncertainties are pushing companies to the brink. They are trying
(02:01):
to stay alive by using ever more creative, some would
say overly aggressive tactics to write down debt and delay repayments.
So Scott, let's start there. You are the perfect guests
to discuss this. Where do we go next with the lemes.
Otherwise there haven't been that many recently. I all we
hitting some kind of a wall, given potential for reputational
risk and the longer term damage to the investor base.
Speaker 3 (02:24):
I don't think so. I mean, I do agree that
there was probably a small pause. I think some of
that was candidly just over the summer, people taking a break,
maybe our lender base having enough of the lemies they
had their fill. But I don't think the overall playbook
has changed. I think, you know, particularly in the stressier
situations where you continue to have borrowers and sponsors with
(02:46):
flexibility in their documents, and particularly in a situation where
they have time, meaning there's not a catalyst, liquidity or
maturity that's going to limit their playing field. I think
you'll continue to see the lemy played book rolled out.
You know, whether or not it's going to be to
the level of volume we've seen over the last year
or two, I guess remains to be seen. I think
(03:07):
you're starting to see some companies just kind of tip
over and go the traditional way here in the US,
you know, a chapter over season, a different type of process.
But don't I don't think you've seen a real material
slow down in Leomi. I think it will continue.
Speaker 2 (03:22):
Skins often asked who really benefits from an lem as
a lot of companies and ultimately end up in bankruptcy.
There was an interesting article the other day on the
Terminal about a report from Edward Altman and Eric Rosenthal
that talked about the number of companies that file for
bankruptcy within two years of executing a large scale ANLUM.
Speaker 3 (03:40):
Right, I mean, my honest answer to that question is,
and it's a good question, is always the same, I think,
particularly in a private scenario, of the sponsors almost always
benefit because if you step back and look at the situation,
presumably there was some financial crisis that they are staving
off where there may have otherwise been a change of
control or a more traditional process which would facilitate a
(04:03):
transfer of ownership. The sponsors continuing to stay in their
seat through these lemies. So I think while they may
be giving up document flexibility and other things as the
trade with the paribial lenders, in the long run, even
if it files for bankruptcy in two or three years, right,
they bought those extra two or three years, and whether
or not obviously result in what they want. It is
(04:23):
a different question, I think. Apart from that, obviously you
need two to tango, so to speak, and you need
willing lenders to participate in these transactions. And I'm sure
we'll talk about this, but I think historically what we've
been seeing, particularly in the US and most see what
happens in Europe has been, you know, the larger institutions,
the ones with more exposure, are obviously better situated at
(04:46):
the negotiation table to do better for themselves gosh.
Speaker 2 (04:50):
And then lemies are typically more successful if they're in
conjunction with a company doing some sort of turnaround. Correct. Like,
I cover the communications sector, and I've seen cases where
that works, in cases where it does, and a great
one was lumin Technologies. They did at a very large
scale l ME a couple of years ago, and then
they turned around and they signed some high capacity network
deals for AI capacity that brought in a lot of
(05:11):
cash up front, really helped turn their business around. They
turned around, they're selling their consumer five operations to AT
and T and you've seen a significant increase in their
bond prices, a lowering of their bond yields. So it
has worked. But there was in conjunction with something helping
turning it around. The other side of the story could
be a company like iHeart. They just did a rather
large restructuring lemy within the past year. But you know,
(05:35):
the industry still faces a challenge. So a lot of
those bonds are yielding well over eleven percent, so there's
still difficulties there, right.
Speaker 3 (05:42):
I mean, look, some of these are play for time.
If you think about kind of traditional commodity driven businesses
where you have cycles and maybe it's the wrong time
in the cycle for the business and they're the sponsor
and the owner just looking for more time for that
cycle to come back. There seems to be more receptivity
because the people and invest in these businesses seem to
understand that. In leemy for the sake of an enemy,
(06:05):
which I think is kind of the other end of
the spectrum where lenders are just taking discount and hoping
for a better day without a real game plan, as
you said, whether it's M and A or something else,
or a change in the industry or macro change like
we've seen with some of the terrific issues that have
impacted the trading prices of these credits. I think that's
(06:25):
probably where you're seeing a little bit of a slowdown
of the desire on the lenders part because again, you
need two parties to do these, to engage in analomy, right,
there needs to be a bigger selling point. We're doing
this because, right because there's a change that ultimately is
going to result in the company doing better and therefore,
as lenders to the company, your recovery is being better.
Speaker 1 (06:46):
There's also some concern around the kind of legality of these,
you know, given that they are getting very aggressive and
some people getting a bit aggrieved. We had you a
recent event in LA when you were alongside Cuxton Ellis
to find his point of David Nemchek, who said that
these tools for allowing creditors to band together for greats
and negotiating leverage against borrows could be illegal. He's calling
(07:08):
them anti competitive. What do you make of that?
Speaker 3 (07:11):
I think, with all due respect to Dave, who I
know and respect, I think you should stay in his lane.
I don't think on this particular subject he's right. I mean,
we've spent a lot of time with our anti trust
experts internally and my competitors who also put out cooperation
agreements in the market I'm sure have done the same, right,
we don't do anything without doing our work on the
(07:32):
front end. And I think the punchline is we don't
feel that they are now. You know, within the current
construct there may be constructs where people overreach and say
and this doesn't exist at least to the best of
my knowledge. But you know, for example, if XYZ sponsor
comes to the market, we're all going to band together
in any future financing and not give them financing for
(07:54):
less than you know, S plus one thousand. Like that
definitely has some anti competitive overlay, but that's not what
these documents do. So I think they thread the needle.
I understand why if you're you know, and they clearly are,
you know, the dominant player on the company sponsors side,
why you don't like them because they're taking away some
of the flexibility that you would otherwise have under the document.
(08:15):
So I get the chessboard. We all play chess for
a living. But I think as it relates to legality,
I think we feel very comfortable that they're fine.
Speaker 1 (08:22):
But do you feel that the smaller lenders might litigate?
I mean, as our ACE reporters, Reshmi bas who puts
it private equity is dumping angry lenders in the cheap seats.
There's a class system developing, there's a whole you know
a load of examples of smaller investors getting burned.
Speaker 3 (08:38):
I think it depends, right, and this is kind of
the the art, not science, to these enemies on a
one by one basis, right in. What you're talking about
is kind of the textbook elemy where there's a deal
with the sponsor and there is a disparity in treatment,
usually from and it's usually just the function of the
largest lenders to the small slenders. To your point, then obviously,
(09:01):
if you're the smaller lender and you're not getting the
same deal, you're not very happy. I think the question
becomes is the deal good enough where those lenders, while
they may not love it, will participate because the alternative
is not great, Or do you end up in a
situation where the deal is so aggressive that people just say,
you know, why not just litigate? Right at this point,
(09:23):
I've been put to your point all the way up
in the nosebleeds, and it's worth hiring a lawyer and
fighting the fight, I would say, at least, And we've
had a couple that have had some litigation, but at
least in most of the lme's there's very high participation
and take up, which I think is a sign that
you know, collectively, the company and the lenders and the
advisors kind of thread the needle in the right way
(09:46):
where it's kind of good enough, where everyone's going to participate,
even if it's not equal treatment.
Speaker 2 (09:52):
So if we take a step back, when you think
about forming a group or representing debt holders, so how
early do you get involved and how quickly do you
try to form a group with a cooperation agreement?
Speaker 3 (10:03):
Two different things in my mind, and group formation, you know,
comes in many flavors. I think the reality is, and
I think everyone understands this. There's there's a lot of
movement early on the on both sides of the transom,
on the lender and on the borrowers side. But I
think on the lender side, and I think a lot
(10:24):
of credits are probably coming into people's visibility, probably you know,
sooner than is obvious, meaning you know, we'll be talking
to a very large lender in a particular credit. It's
on their internal watch list. Maybe it's still trades in
the nineties, it's got some macroheadwinds, you know, and dependent
(10:45):
candidly with the lum environment. Depending on who the sponsor is,
people may say, as soon as this trade's off, we
need to organize because we're worried the sponsor may be aggressive.
So there are different catalysts, but I would say generally speaking,
organization comes early. The reality is by the time something
hits you know, your guy's news wire or you know,
bankruptcy rags or whatever, you should assume that deal has
(11:07):
been staffed for a very long period of time as
an advisor, and so I think that has been the
case for a while. Cooperation agreements, I do not think,
despite everyone probably feels like you know, in every deal
we're out peddling a cooperation agreement, it's not one size
to it's all. There are plenty of deals where a
(11:27):
cooperation agreement doesn't make sense because it may limit your
optionality in terms of what you want to do and
without going too far down the transmit. But like we
did Tropicana earlier this year, and we never had a
cooperation agreement in that deal, and that wound up being
an enemy with a multi tiered approach like we've talked
about in other situations where you have you know, long
(11:50):
dated maturities, which by definition means that the company has
more time to play the games and needs to play
and lose documents. And perhaps a sponsor who's known for
not being afraid to use the room and their documents
and cooperation rooments makes more sense. But it is not.
It's not as easy as a decision as I think
(12:11):
maybe the outside thinks it is. It's something that people
ponder and debate as a group. I mean, we're having
a couple of debates on it this week on different credits,
whether or not it makes sense.
Speaker 2 (12:20):
So and when forming a group, do you try and
reach certain thresholds as far as owning a certain amount
of principle and whether in different parts of the capital
structure right so that you have the term loans, maybe
secured bonds on secured bonds, hold co OpCo or do
you look at some of the biggest bonds there and
try and get a obviously over fifty percent would be great,
But are the certain percentages where you feel you have
(12:41):
enough to go to the company and yeah.
Speaker 3 (12:44):
I think you hit. I mean, this goes back ten years,
long before the world of alomy. Just in the world
of like amendments and forbearance agreements and waving defaults when
we actually had covenants. The fifty percent, particularly in the
TLB market obviously, is usually the magic number that were
aiming for. I think sub fifty percent. You have to
think about it from the company's perspective, like what do
(13:05):
you really have to offer? Right, So in a traditional environment,
you know I could wave, I can forbear, I can amend,
I could do things to help the borrow or if
they get in a tough spot from a financing perspective,
In a document that you know doesn't have things like
support nation protection, I could provide new money on a
super senior basis with fifty one percent. And then in
(13:26):
the LME environment, you can provide amendments that may be
necessary to the documents to implement the LME. So look,
when you first start, a group might might be thirty
five or forty like sure, but I think realistically for
you to have bargaining power from the other side's perspective,
(13:47):
you should probably have north of fifty percent.
Speaker 1 (13:50):
Do you tend to represent these DICO or the restructuring group?
Speaker 3 (13:54):
Oh, that's a great question. So usually the way it
happens is there will come together first. It It should
be the largest lenders by definition, right, because they are
the ones picking advisors, bankers and lawyers, and usually at
least in my deals. Right Because to the point you
were making earlier, a lot of these things form early
(14:15):
and kind of sit around for a little while. A
STEERCO really only gets constituted at a time when things
are starting to move. So companies advisors reach out, they
send across an NDA to us and our banker they're
ready to talk. That's the time usually where you'll solidify
a steerco. It doesn't usually make sense early on in
an engagement to create that dichotomy because it's you know,
(14:38):
some of these deals some may just get refinanced and
nothing ever happens. Right, So there's not there's no point.
Speaker 1 (14:43):
Right, Okay. In general, valuations are coming down, you know,
the economy slowing their headwinds. How is that changing the
restructuring tools?
Speaker 3 (14:55):
I think I'm seeing that, you know, despite maybe some
pressed to the contrary, like what I'm seeing actually is
a decent amount of traditional restructuring uptick. Again, I don't
think LEM is going anywhere. I think that tool will
remain a great tool for candidly for sponsors and to
a lesser extent for our clients. But I have seen both,
(15:19):
you know, new deals that need to go traditional restructuring
because the problem is too big to solve through an lemy,
or there's a liquidity crisis that no one's going to
fund without fixing the balance sheet. And I've candidly had
you know, multiple of my old lems, and this will
be you know, to your earlier point the test of time.
I've had some old lem's come back that you know,
(15:42):
we did the lemy and the band aid kind of
slipped off in this environment, and it's probably going to
need to be a real restructuring this time.
Speaker 1 (15:50):
On the sponsor's side, are you seeing more than by
a bat that debts.
Speaker 3 (15:56):
Certain sponsors, I think certain sponsors that are more credit savvy,
like without naming any names, like some of the big
sponsors that are also big credit players in those situations,
we tend to see them be more astute too, you know,
particularly if they think things are just mispriced, you know,
going in and buying up a lot of you know,
sometimes a lot of the junior in debtedness, which obviously
(16:18):
is gonna be trading at the discount the most discount.
And then I've had situations some of which I'm involved,
now are you know? Unknowingly to us, the sponsor got
involved in the capital structure, and then when we came
to the table to negotiate a deal, they used it
as a leverage chip, right, like I'll take this debt
and subordinate it if you'll do X, Y and Z.
(16:38):
So I think it's it's definitely a play. I don't
think it's all sponsors though, I think it's a subset
of sponsors.
Speaker 1 (16:45):
What about sponsors stress more broadly? Are using situations where
there is stress spreading across the portfolio and how does
that affect sponsor's choice and what to do.
Speaker 3 (16:52):
You mean like one particular sponsor having a lot of
distressed names? Yes, yeah, I mean I think we probably
know who all those are. But yeah, I mean I
think the ones that have had a lot of distress
in their portfolios to deal with tend to be the
ones that are doing more of the leemy stuff, right
because they're trying to figure out a way to punt
things forward and give themselves a lifeline. Just thinking through
(17:16):
the things we have in the pipeline, Like, yeah, we
have the flip side of that is also true, though,
as I say it out loud, I mean, we have
some sponsors that are like you know, white shoe sponsors
that everyone knows, that have several troubled names in their
port co in their portfolio that historically have not engaged
in lemy and don't seem to be interested in engaging
(17:38):
in eleme. So it's really a mix bag.
Speaker 2 (17:42):
So the investors you work with, I think you mentioned
this earlier about putting new money in so just you know,
question is how willing are they often to invest more money?
Is it throwing good money after bad? I mean I
can think of a recent example where it's worked. Echo
Star Yeah great, right, Like so they well they did
two things, trying to do something with the DBS bond holders,
which they fought back on and that seemed to be
(18:04):
the right move. Give one of those DBS bonds traight now.
But the Echo Star convert holders not only did they
roll over their convert but they invested a lot of
new money with a large new bond. And now with
the recent spectrum sales, those bonds are up. You know,
I've done very very well. So it's just the willingness
for lenders to invest more money in a situation like that.
Speaker 3 (18:24):
Well, I mean Echo Store obviously was a great result,
and we know a lot of folks in that they're
very happy with the way that turned out. I think
in these situations, I do think, Look, all of our
clients are very savvy. They're not just going to pour
good money after bad for the sake of doing so.
And it's a function of in sometimes defensive capital right,
protecting your existing investment. I will say I feel like
(18:48):
on a personal level, just in the stuff I'm working on,
I've definitely seen more situations where investors have tapped the
brakes on writing the new check because they're concerned that
tier point they're just putting good money after bad. And again,
I think in those scenarios you got to look for context, meaning, well,
if we don't fund, what does that mean. And if
(19:10):
the answer is it means a desperate sponsor is going
to move whatever valuable collateral we have to fund it
and rip it out of our system, then it may
bring us back to the table, right, because the alternative
is not very great for us if it means you're
putting pressure on junior creditors in the structure or two,
well what have you and the sponsor to protect themselves
(19:31):
because the alternative is a bankruptcy where they get wiped out.
Then that's okay result if you're the senior lender. So
the playing board is set. I do think, I mean,
I don't think anything's changed, right. I think all of
our clients are extremely savvy and intelligent. They wouldn't just
write a check for the sake of writing a check.
I do think people are pressing back more though, on
(19:53):
situations where the company just comes and expects that the
senior lenders are just going to solve the problem for them.
Speaker 2 (19:59):
Yeah. And I guess there's certainly example where investors refuse
to take the haircut, right because again we go back
to Echo Star Wars, a very complicated situation, but they
were trying to I think that an agreement to sell
Dish dbs to direct TV for a dollar, but the
bond holders were required to were offered to swap into
a direct TV debt, which obviously would be a big
improvement and credit quality, but they were required to take
(20:19):
some very large haircuts depending on the bond and they
were refuse. I guess with certain cases will lenders be like, hey,
we're willing to take our chances if this goes bankrupt,
well restructure and we'll own it throughout the process ourselves.
Speaker 3 (20:32):
Yeah, I think that's very much the case. I mean, obviously,
without getting into any specifics, viv a situation now where
we've been there for a while. There's been on again,
off again discussions with the company and the sponsor. We
kind of hit pause on an ELM that we were
talking about months ago. The business has continued to deteriorate,
(20:52):
and I think the sponsor still is expecting the clients
to take a haircut. And I think that's a situation
where it's like, I know what the alternative is. It's
not great, but it also doesn't make sense for me
to give back forty cents in my face claim if
I think this thing is headed towards the bankruptcy. So yeah,
I mean that's a live deal I'm working on at
the moment. So I do think you're seeing some of
(21:14):
that pushback.
Speaker 1 (21:15):
I'll want you look at the secondary market's got I mean,
in terms of co op versus non co op trading.
Is that a signal that you look at.
Speaker 3 (21:21):
I mean, we're aware of it, and we have to
be cognizant of it and candidly when we draw drop
some of these co ops. You know, sometimes you got
to spend time with the trading desks on the phone
just to kind of get them familiar, because obviously the
clients want liquidity, and so if the co op is
strangling liquidity, that doesn't help our clients. And you know,
when we did al Tease right for example, I don't
(21:43):
think the European traders were too used to or not
used to it at all, dealing with you know, co
op versus non co op paper. So we spent enormous
amount of time trying to educate the desks to make
it as painful as painless as possible. Sorry painful, but
I would say we're cognizant of it. Again, I mean,
(22:04):
I don't know if we're going to get into this,
but there's multiple flavors of co ops nowadays. So in
a co op, we're ninety percent, you know, hypothetically of
the loan is under co op. The trading issue is
usually not an issue. In a world in which you
have a you know, fifty percent co op, then you
have a big trading disparity, and you know, we even
(22:25):
have some situations that that we recently and something I'm
involved in which was a head scratcher to me. We
had people calling us because there was a trading disparity
between the co op and the Steerco paper, which made
no sense to me because there was no there's no
way to delineate Steerco paper in these situations. So yeah,
I mean it definitely impacts trading. The punchline is if
(22:46):
we're doing it right, we're trying to make sure it's
as like what is possible, so it's not a hindrance
on our client's ability to trade. And trading disparity I
think is very much a contextualized issue, meaning if or
seeing a bifurcated deal coming, then there's a trading disparity.
If everyone thinks that this is a everyone's holding hands
and getting the same deal, there should not be a
(23:08):
trading disparity.
Speaker 1 (23:09):
So talk to us about Europe, Scott. I mean, I
know you spend a lot of time there, and you've
built up a team there and you you kind of
have good presence there. When I talked to people in Europe,
you know, even not that long ago, you know that
general sense is and I'm paraphrasing and probably crudely breaking
it down, but Europe is slightly more genteel judges won't
stand for the shenanigans that you get in the US.
(23:30):
Management has more exposure to personal liability, there's more concern
about reputational risk.
Speaker 3 (23:34):
Is that so I definitely think Europe is different. I
don't think you can take the American model and just
export it, so I think that's one hundred percent tro
and as the American I should definitely refer to the Europeans.
But from my experience, what I've seen is it is
a smaller sandbox in the sense of at least on
the lender side, right there's just there's less institutions, So
(23:58):
it's kind of hard to do one of these bifrikid
deals when these folks are working with each other in
every single credit historically, So there's less appetite for the
lender on lender of violence as it's been coined here.
And I do think there is reputational risk, but that
I mean that was the case here as well right
ten years ago. And I think most of the White
(24:19):
Chee sponsors, maybe minus one or two, have kind of
ripped off the band aid because I think they've discovered
that the markets are forgiving and have a short memory.
So what I would say is, do I see the
eleemy stuff moving to Europe? Yes? Do I see it
in the volume that we have here in the US? Know?
(24:41):
And do I see the more aggressive transactions that have
been implemented here in the US, you know, becoming commonplace
in Europe? Probably not, But I do think if you
just step back and think about it, same documents in
large measure, a lot of them are the same sponsors, right,
It's just their investments up versus the US, and what
(25:02):
you're seeing is on the same advisors, right, So you're
getting the same you know, without naming names. You're getting
the same lawyers and bankers hired in Europe for deals
that they do here. So it's not surprising that they
would potentially roll out a playbook that's worked. So it
remains to be seen. But I don't disagree with your
your your intro. I think that is very true.
Speaker 1 (25:22):
Are there places that it works better countries?
Speaker 3 (25:25):
Okay? Now, now we're going to get into my my
knowledge of the various geographies and overall lying fiduciary duties.
But I mean it is relevant right to your point
about because look, if someone's looking the challenge in element,
the first place, you look at the docs, right did
did they breach a covenant? Did they over blast the basket? Did?
(25:47):
The reality is you have very smart lawyers on both
sides of the table. For the most part, that's usually
a no. You could get creative with an argument, but
presumably there was room in the documents to begin with
to at least theoretically move an asset for example. So
the second place a lot of people go is okay,
is there a state law claim of action like a
fiduciary duty type claim or a fraudulent transfer type claim,
(26:08):
which obviously will vary by jurisdiction. So for example, when
we did SFRLTAST France and there are a lot of threats,
you know, as part of the negotiation about moving assets
away from us, my partner, John Pierre Fargus, who runs
my French office or my French restruction practice, who's best
in class there, felt very confident that from a fiduciary
(26:31):
duty liability standpoint, that that was a hollow threat versus
here in the US, we would take that threat much
more seriously. So those type of jurisdictional overlay issues are
very relevant. Whether it's France or Luxembourg or the UK
or Germany, it varies by jurisdiction. So yes, that comes
into play as well. I think the US has, you know,
(26:53):
the business judgment standards a little bit more protective of
the boards here.
Speaker 1 (26:56):
But you wouldn't say I'll go to Italy ol Spain
and we can get away with more stuff. For there's
not like a target on a particular country where things
are loose.
Speaker 3 (27:05):
I think there probably is. I won't speak to it
for obvious reasons, but I think there are certain jurisdictions,
you know, deferring to my colleagues overseas where they feel
there's I mean, we talk about these things with our clients. Right,
if it's in France, you probably can't do X. If
it's in Germany, you probably can't do Y. If it's
in Luxembourg, maybe you could do this. So it is
(27:25):
part of the conversation when we're thinking about how to
you know, roll forward a transact.
Speaker 1 (27:29):
It's more case by case than you know you're you
are beefing up massively in one country because you see
a huge amount of transactions in one place.
Speaker 3 (27:38):
I mean, right now, again from from the American practitioners perspective,
you know, I'm seeing a ton of distress in France
and we, luckily for US, we have a great practice there,
so we're doing a lot of it. So like, are
we in France in a big way because there's a
ton of distress? Yes? Is that because we think it's
a leemy friendly environment? No? Actually, probably the inverse is true.
Speaker 1 (28:04):
So it's also a question of scale. How much does
that act as a deterrent the deal? The deals relatively
much smaller than they are in the US.
Speaker 3 (28:13):
Right in the capital structures, yes, yeah, I mean for
the for the most part, that's true. I mean, but
if obviously SFR was a massive capital structure. You know,
it's public that we're involved in multis International, it's another
massive capital structure. So there are some big ones, but
you're right, I mean, there's less multi billion dollar structures
than we deal with here in the US.
Speaker 1 (28:32):
And other than the fact that cop agreements work, which
you're a big advocate of, what are the lessons do
we learned from Maltese?
Speaker 3 (28:39):
So, and just to pause on that, I think co
op agreements are legal to go to a discussion earlier,
and I think they're appropriate in certain circumstances. I don't
think that there and I said it earlier, I'll say
it again. I don't think that they're one size fits all.
I think there are times sometimes when actually our clients
want to rush to a co op, where maybe we
should let things play forward to see if it makes
(29:02):
sense contextually in that circumstance. In SFR, it made a
ton of sense to me. That was a little bit
more of a no brainer. You had a massive capital structure.
You had a company who came out who basically said
telegraph they were looking to capture discount. And you had
lenders within our syndicate who were US holders, Euro holders,
(29:25):
you had power holders, You had people that bought in
at a steep discount. So you just had varying degrees
of thought processes from their own internal perspective. And I
think had there not been a co op, given the
size of that structure, it would have been very easy
for the company its advisors to go pick off large
holders and do things to pit holders against each other.
(29:47):
So in that one it made a lot of sense
to me. No one was looking to do an enemy
off the backs of someone else, and that deal which
printed was one hundred percent pro rata. Everyone in the
secured group got the same deal, So that made a
lot of sense. In other scenarios where you have really
big lenders, you know, paper straining as deep discount, they
(30:10):
may want to put money to work, you know, rushing
out with a big co op may cut against their interests.
Speaker 1 (30:16):
Just going back to Europe, how's the build out of
your business going. You've hired some people, you're hiring more.
Speaker 3 (30:21):
Yeah, it's going great. In the US. I mean, we've
been plugging away for a while and have been extremely
busy for years. Knock on wood, we haven't you know,
we haven't had a lull on a on a personal level.
So two things. One is, obviously the market has changed.
I've been doing this roughly twenty five years and it's
(30:41):
changed drastically in the last five and luckily we were
part of that change as opposed to reacting to it.
And that is this whole change to eleemy being you know,
a precursor and sometimes a substitute for a change of
control type transaction. So you need more lawyers that know
how to do that work. And it really is finance
(31:02):
heavy and not all bankruptcy lawyers, certainly when I started
my career twenty five years ago, were heavily trained to
focus on every nuance at credit docs at a young age,
and so we've really changed our training as it relates
to our up and comers, and also are recruiting. So
(31:23):
a lot of the hiring I've done in the last
two years have really been heavy finance folks, not people
I would call traditional restructuring lawyers, not the folks that
throw in a suit and tie and go to court,
but the ones that could dig into a credit agreement
and come up with a host of options for our clients.
And I'll continue to we can never have enough bench
as it relates to people with that skill set. Separately,
(31:46):
a big personal goal of mine was really to build
out the European practice because in my mind I could
see this work that we do here spreading to Europe again,
not necessarily the same level of intensity or aggressiveness that
you see in the US, but but versions of it.
(32:08):
And you know, most of our clients that you know
we'd rely on here for new work are the same
people that play in Europe. So to us, it was
a natural progression to try to continue that relationship overseas. Historically,
we always had a very deep team in places like France,
so that was easy. In Europe, we were good, but
(32:29):
we needed more, I mean honestly, and so we went
out and we uh and that's a tough market to recruit,
and I mean it's just it's a small, finite universe
of people that are super relevant and everyone wants those
samful of people. So we were able to pull off
a pretty big acquisition earlier this year. We brought in
the leader of senc's restruction former snce's restructuring practice and
(32:54):
finance and a host of associates game with them, which
was a huge bolster to our group in London. And
I would say, I'm not done there. There's more to come.
Speaker 1 (33:02):
And more in other countries in Europe.
Speaker 3 (33:04):
Yeah, one hundred percent as well, And there's one in
particular that will be coming soon. But the jurisdiction is
so small. Stay away from avoiding.
Speaker 1 (33:11):
But again, if I'm sitting in Milano, Madrid or Frankfurt,
why why give some done? I mean, why not just
go to my guy that I've been talking to for decades,
that you know, speaks my language. He's been sitting there
from the front of.
Speaker 3 (33:22):
Me, from an advisor front, or from a client front.
Speaker 1 (33:24):
From a you know, if I want to get a
little fun to do this sort of why do I
need to go to give some done.
Speaker 3 (33:29):
Well for this sort of work. I mean, my honest
pitch for that, because I think it rained true, is
we've just done more of it than anyone else, and
so there's a certain level of sophistication that we have
just having dealt with all this stuff for the years.
And I think if you think about you know, deals
like Altice, which was an lum in Europe, it was
(33:49):
a combination of my French practitioners who are best in
class and kind of know that market in the nuances,
and then us taking the technology that we've been doing
here forever and kind of transplanting it with the with
the benefit of our French partner's you know, advice to
make sure we're not hitting any guardrails and transplanting it.
So I think that's you know, the pitch, so to speak.
(34:12):
I think it's there. There's something that is said if
you even look at the US market, there's really a
subset of law firms both on the company and on
the lender side that do all of this. So I
think it's it's a natural progression to take that expertise
and to bring it to your clients overseas.
Speaker 2 (34:31):
And then when when you're representing debt holders and you're
dealing with a company, is there any difference in the
type of company, For example, if it's a sponsor private
equity held equity for the most part, or it could
be a company that's got a very influential founder like
we talked about Echo Star with Charlie organ or or
dealing with a more widely held public company.
Speaker 3 (34:53):
Uh. Yeah, I mean there's definitely a difference in my
mind between public and private. You know, I don't think
you've really seen much of any public style le me right,
because if you think about people's motivations to do these transactions,
if you're a sponsor of the motivation is pretty obvious
to do one of these transactions to get more time,
to hopefully get a return to your LPs, to not
(35:17):
have to write down an investment, etc. I mean, obviously,
if you're dealing with the company of public shareholders, I
mean they're still benefit people are fiduciaries to their public shareholders,
but you usually don't have like one united voice so
to speak, pushing in this direction. I do think, I mean,
we have some stuff in the pipeline and in the
work so to speak that are public, so we'll see
(35:40):
if we kind of finally cross that transom. But I
think for the most part, just given you need another
party to transact with who's motivated, I do think that
most of the stuff will stay on the sponsor side.
Speaker 1 (35:53):
I want to ask you it's about the concept of
m blockers and omni blockers. A recent guest, Sabrina Fox Legal,
said that they should be on all deals. Essentially, this
is anti lem language and the documentation saying the borrow
won't use terms to subordinate lenders kind of umbrella protection
against the range of lemies. Is that a viable option
when it catch on to you seeing any of those
(36:13):
at all.
Speaker 3 (36:14):
Well, there are I mean that's a generic leemy blocker term.
I mean, if you look at deals nowadays, there's things
like sort of protection or j crew protection or chew
WE protection, some of the more famous lemies that are
out there. And I think it goes to the whole
commentary we're having before, is like in the syndication process,
(36:37):
how much leverage do folks have on the front end
to get those kind of protections in the document. You're
seeing more and more of them. You're seeing things like
J crew protection in documents. That being said, right, it's
a cat and mouse game. You'll see a version of
J Crow protection and then someone on our team will
take a look at it and be like, I've figured
out a way to navigate around it. So I think
(36:58):
you are seeing some documents on the primary issuing side
where some of these protections are getting in. Where they're
really finding their way in is post Lmy. So people say, Okay,
I'm doing this deal because you have leverage against me,
because you have this optionality under the document. However, you
know I'm shutting the door, right. So on the back
end of this deal, we're going to close everything off.
(37:19):
We're going to have every protection. We're going to tighten
down your baskets, we're going to tighten down your r
peak capacity, et cetera. And So what's interesting is you're
now seeing a lot of people in the secondary market,
and I talk to clients all the time that are
very interested in buying the post Elmy paper in the
marketplace because that they know is protected paper. Look if
(37:41):
on the on the front end of an underwriting process,
if if lenders were able to advocate and get in
real enemy protections and all these documents, we could just
go back to being restructing lawyers. I'm not seeing a
change anytime soon.
Speaker 1 (37:56):
And that hasn't died restructing laws.
Speaker 3 (37:58):
There was a yeah. I rolled my eyes a little
bit at that. No, I don't think it's died. I
think the markets changed. My honest view is what's happened
is instead of this being kind of a one step
process when you need to recapitalize or fix a business,
it's almost become a two step process. The lemy comes first,
and if the enemy sticks, there never is a part two.
(38:20):
So maybe that kills the restructuring lawyer. But I think
what we'll probably see over time and time will tell
is that it won't stick in a decent percentage of
these and you'll still have the restructure. So so now
I'm not a I'm not a believer in the line.
I thought that restructuring lawyers are dead, But.
Speaker 1 (38:34):
The real Senate would just say it's another way of
the lawyers getting paid twice.
Speaker 3 (38:37):
I mean that it's a cynical look at it, but
it happens to be true. I mean, it's it's two
bites at the apple, so to speak.
Speaker 1 (38:44):
If it's required, so talk about the pipeline. You do
expect these things to come back lemies, you know, is
it coming back strong in the in the in the
fourth quarter, does it continue into next year? Do you
see a good you know, wide range of sectors involved
in times of businesses?
Speaker 3 (39:01):
Yeah, so I would say it's it's definitely ticking up
a bit. I think everyone kind of took a deep breath, candidly,
because I feel like so many of our clients and
again it's the same players, and all of these deals
just had one after the other after the other and
probably had enough, so to speak. I don't think from
talking to my own clients that they've gone anti eleemy.
(39:24):
I do think perhaps sponsors have to make a better
case to the lender community as to why in a
particular credit it makes sense for them to engage on
lem I don't think it's just because the debt's trading off,
So I think there's maybe a little bit more of
a dance that needs to happen on both sides of
the table. Yeah, I think there will continue to be,
(39:49):
you know, a large amount of enemy rolling into twenty five.
I don't think that's going to change. I don't know
that it's sector specific per se, but certain sectors which
are struggling, whether it's chemicals or what have you at
the moment, are more prone to it just because their
securities pricings are trading off. Right. So if you have
(40:10):
a bunch of companies in the same sector and they're
all trading in the sixties, I think you might see
a lot of enemy in that particular sector. But I don't.
I think it has more to do with the trading
volumes and the trading prices than it has to do
with you know, advisors, you know, at targeting a particular sector.
Speaker 1 (40:26):
But rolling into twenty six you said twenty five.
Speaker 3 (40:29):
I'm sorry, yeah, finish twenty fifth. It's been a long year. Yes,
I mean, I think realistically it'll it'll continue to roll in.
Speaker 1 (40:34):
And it's the US, it's Europe, it's.
Speaker 3 (40:36):
I think so I mean, I I us I think
is is you could take for granted that you'll continue
to see high volume of enemies here. I think everyone's
used to it, and sponsors are kind of gotten used
to it as well, maybe less concerned about the reputational hit. Europe.
I think you've seen a couple posts SFR, not on
(40:57):
the same scale or size, So I think think you'll
continue to see them in Europe again, you know, for
all the reasons we discussed earlier. Do I think it
becomes the snowball that is the US now? Do I
think you'll see more of them with some of the
same players in Bob, Yes, but.
Speaker 1 (41:13):
You are global, why not Let's time? Why not Africa,
Middle East? Asia?
Speaker 3 (41:17):
We don't have offices in all those places, so that
could be the next thing venture Why Yeah, I think
I think we'll probably we'll stick to to Europe for
the time being. In the US, I mean, we'll see
if this becomes becomes a trend anywhere else. But I think,
you know, in certain of those jurisdictions, it's just restructuring
per se is not as much of a developed practice
(41:39):
as it is in US and Europe.
Speaker 1 (41:41):
And basically the aggressive you know, the enemies in the
US just get more aggressive, do they more cut throat?
And Europe joins in.
Speaker 3 (41:49):
So I think the opposite is true. I think the
enemies in the US have actually tried to be more inclusive.
I mean, you know, without getting into it because we're
involved in some of them. But if you look at
like the twenty twenty type transactions during COVID of like
sort of and Trimark and board riders that were truly
non Parada, I think the market had shied away from those.
(42:09):
They've tried to create a a a structure where everyone's
incentivized to participate. And you know, from our perspective, you know,
a good enemy is obviously one that staves off a
change of control in the long term into your you
know examples of ecro Store and these other ones where
on the back end there's a recovery and our clients
(42:31):
do very well economically, that that's the best enemy. But
I think in the short term, because none of us
have a crystal ball when when we think about what's
a good enemy that we just closed, you know, having
very high take up and participation is is good in
our minds as advisors at least because it means we
created a mouse trap that worked that people you know,
kind of played with. If if you have a huge
(42:53):
amount of holdouts, probably not a great enemy, and.
Speaker 1 (42:56):
The client understands that and respective that they're don't just
trying to get every last dollar rounds, but they actually see.
Speaker 3 (43:01):
Oh, they one hundred percent understand the playing field. I mean,
if you think about it, if fifty percent of you know,
talking about the fifty percent figure before, fifty percent of
people just went in the room, cut a deal and
took all the goodies for themselves, you'd have forty nine
percent not participating, right, even though they theoretically got a
better deal. That that's all of our clients are smart
enough to know that's not that's not a win, that's
(43:23):
a litigation or even worse, you know, a company just
faltering and falling down into a bankruptcy. So yeah, clients,
clients totally get that. You know, you might be able
to do a little bit better, but you know you
need to leave enough where people want to participate.
Speaker 1 (43:38):
Great stuff, Scott Greenberg with Gibson done. Many thanks for
joining us on the Credit.
Speaker 3 (43:42):
Edge, Thanks for having me, Thank you, and.
Speaker 1 (43:44):
Of course very grateful to Steve Flynn with Bloomberg Intelligence.
Thank you for joining us today.
Speaker 2 (43:48):
Great to be here. Thank you for even more.
Speaker 1 (43:50):
Credit market analysis and insight. Read all of Steve's great
work on the Bloomberg Terminal. Bloomberg Intelligence is part of
our research department, with five hundred analysts and strategies working
across all markets, coveraging over two thousand equities and credits
and outlooks on more than ninety industries and one hundred
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Credit Edge wherever you get your podcasts. We're on Apples,
(44:11):
Spotify and all other good podcast providers, including the Bloomberg
Terminal at b pod Go. Give us a review, tell
your friends, or email me directly at jcrombieight at Bloomberg
dot net. I'm James Crombie. It's been a pleasure having
you join us again next week on the Credit Edge
Hello, and welcome to the Credit Edge, a WEEKI Monkets podcast.
My name is James Grumby. I'm as senior editor at Bloomberg.
Speaker 2 (00:24):
And I'm Steve Flynn. I'm a team leader and senior
credit analyst for Bloomberg Intelligence and I cover the communications sector.
This week, we're very pleased to welcome Scott Greenberg, Global
Chair of the Business Restructuring and Reorganization Practice at Gibson Dunn.
How are you, Scott, I'm good, Thanks for having me in,
Thanks for being here. Scott is a partner in Gibson
(00:44):
Dun's New York office, Global chair of the firm's Business
Restructuring and Reorganization Practice Group and a member of the
firm's executive Committee. Scott focuses on representing debtors and creditors
in court and out of court restructurings. Chambers USA described
Scott as an excellent lawyer and deal maker that is brilliant,
super connected, and great at managing adversaries and clients. Prior
(01:07):
to joining Gibson Dunn, Scott was a partner at Jones
Day from twenty thirteen to twenty nineteen, where he also
served as co head of the Jones Day business restructuring
and reorganization practice. Scott has received numerous awards and accolades
from industry associations and publications, including deal Maker of the
Year from The American Lawyer in twenty twenty one. Scott
has recently represented lenders in a number of large restructurings,
(01:30):
including for Altese France, which was the first large scale
liability management exerciser l and E in Europe, Comscope, and
Diamond Sports Group.
Speaker 1 (01:40):
So thank you, Steve, for as we say every week now.
Credit markets are hot and companies are taking advantage, raising
tens of billions of dollars in new debt over the
last few weeks. There's also more distress. Rates are staying
high for longer than most people had expected. There's a
large pile of debt coming due. At the same time,
Trade wars and a whole load of other US policy
uncertainties are pushing companies to the brink. They are trying
(02:01):
to stay alive by using ever more creative, some would
say overly aggressive tactics to write down debt and delay repayments.
So Scott, let's start there. You are the perfect guests
to discuss this. Where do we go next with the lemes.
Otherwise there haven't been that many recently. I all we
hitting some kind of a wall, given potential for reputational
risk and the longer term damage to the investor base.
Speaker 3 (02:24):
I don't think so. I mean, I do agree that
there was probably a small pause. I think some of
that was candidly just over the summer, people taking a break,
maybe our lender base having enough of the lemies they
had their fill. But I don't think the overall playbook
has changed. I think, you know, particularly in the stressier
situations where you continue to have borrowers and sponsors with
(02:46):
flexibility in their documents, and particularly in a situation where
they have time, meaning there's not a catalyst, liquidity or
maturity that's going to limit their playing field. I think
you'll continue to see the lemy played book rolled out.
You know, whether or not it's going to be to
the level of volume we've seen over the last year
or two, I guess remains to be seen. I think
(03:07):
you're starting to see some companies just kind of tip
over and go the traditional way here in the US,
you know, a chapter over season, a different type of process.
But don't I don't think you've seen a real material
slow down in Leomi. I think it will continue.
Speaker 2 (03:22):
Skins often asked who really benefits from an lem as
a lot of companies and ultimately end up in bankruptcy.
There was an interesting article the other day on the
Terminal about a report from Edward Altman and Eric Rosenthal
that talked about the number of companies that file for
bankruptcy within two years of executing a large scale ANLUM.
Speaker 3 (03:40):
Right, I mean, my honest answer to that question is,
and it's a good question, is always the same, I think,
particularly in a private scenario, of the sponsors almost always
benefit because if you step back and look at the situation,
presumably there was some financial crisis that they are staving
off where there may have otherwise been a change of
control or a more traditional process which would facilitate a
(04:03):
transfer of ownership. The sponsors continuing to stay in their
seat through these lemies. So I think while they may
be giving up document flexibility and other things as the
trade with the paribial lenders, in the long run, even
if it files for bankruptcy in two or three years, right,
they bought those extra two or three years, and whether
or not obviously result in what they want. It is
(04:23):
a different question, I think. Apart from that, obviously you
need two to tango, so to speak, and you need
willing lenders to participate in these transactions. And I'm sure
we'll talk about this, but I think historically what we've
been seeing, particularly in the US and most see what
happens in Europe has been, you know, the larger institutions,
the ones with more exposure, are obviously better situated at
(04:46):
the negotiation table to do better for themselves gosh.
Speaker 2 (04:50):
And then lemies are typically more successful if they're in
conjunction with a company doing some sort of turnaround. Correct. Like,
I cover the communications sector, and I've seen cases where
that works, in cases where it does, and a great
one was lumin Technologies. They did at a very large
scale l ME a couple of years ago, and then
they turned around and they signed some high capacity network
deals for AI capacity that brought in a lot of
(05:11):
cash up front, really helped turn their business around. They
turned around, they're selling their consumer five operations to AT
and T and you've seen a significant increase in their
bond prices, a lowering of their bond yields. So it
has worked. But there was in conjunction with something helping
turning it around. The other side of the story could
be a company like iHeart. They just did a rather
large restructuring lemy within the past year. But you know,
(05:35):
the industry still faces a challenge. So a lot of
those bonds are yielding well over eleven percent, so there's
still difficulties there, right.
Speaker 3 (05:42):
I mean, look, some of these are play for time.
If you think about kind of traditional commodity driven businesses
where you have cycles and maybe it's the wrong time
in the cycle for the business and they're the sponsor
and the owner just looking for more time for that
cycle to come back. There seems to be more receptivity
because the people and invest in these businesses seem to
understand that. In leemy for the sake of an enemy,
(06:05):
which I think is kind of the other end of
the spectrum where lenders are just taking discount and hoping
for a better day without a real game plan, as
you said, whether it's M and A or something else,
or a change in the industry or macro change like
we've seen with some of the terrific issues that have
impacted the trading prices of these credits. I think that's
(06:25):
probably where you're seeing a little bit of a slowdown
of the desire on the lenders part because again, you
need two parties to do these, to engage in analomy, right,
there needs to be a bigger selling point. We're doing
this because, right because there's a change that ultimately is
going to result in the company doing better and therefore,
as lenders to the company, your recovery is being better.
Speaker 1 (06:46):
There's also some concern around the kind of legality of these,
you know, given that they are getting very aggressive and
some people getting a bit aggrieved. We had you a
recent event in LA when you were alongside Cuxton Ellis
to find his point of David Nemchek, who said that
these tools for allowing creditors to band together for greats
and negotiating leverage against borrows could be illegal. He's calling
(07:08):
them anti competitive. What do you make of that?
Speaker 3 (07:11):
I think, with all due respect to Dave, who I
know and respect, I think you should stay in his lane.
I don't think on this particular subject he's right. I mean,
we've spent a lot of time with our anti trust
experts internally and my competitors who also put out cooperation
agreements in the market I'm sure have done the same, right,
we don't do anything without doing our work on the
(07:32):
front end. And I think the punchline is we don't
feel that they are now. You know, within the current
construct there may be constructs where people overreach and say
and this doesn't exist at least to the best of
my knowledge. But you know, for example, if XYZ sponsor
comes to the market, we're all going to band together
in any future financing and not give them financing for
(07:54):
less than you know, S plus one thousand. Like that
definitely has some anti competitive overlay, but that's not what
these documents do. So I think they thread the needle.
I understand why if you're you know, and they clearly are,
you know, the dominant player on the company sponsors side,
why you don't like them because they're taking away some
of the flexibility that you would otherwise have under the document.
(08:15):
So I get the chessboard. We all play chess for
a living. But I think as it relates to legality,
I think we feel very comfortable that they're fine.
Speaker 1 (08:22):
But do you feel that the smaller lenders might litigate?
I mean, as our ACE reporters, Reshmi bas who puts
it private equity is dumping angry lenders in the cheap seats.
There's a class system developing, there's a whole you know
a load of examples of smaller investors getting burned.
Speaker 3 (08:38):
I think it depends, right, and this is kind of
the the art, not science, to these enemies on a
one by one basis, right in. What you're talking about
is kind of the textbook elemy where there's a deal
with the sponsor and there is a disparity in treatment,
usually from and it's usually just the function of the
largest lenders to the small slenders. To your point, then obviously,
(09:01):
if you're the smaller lender and you're not getting the
same deal, you're not very happy. I think the question
becomes is the deal good enough where those lenders, while
they may not love it, will participate because the alternative
is not great, Or do you end up in a
situation where the deal is so aggressive that people just say,
you know, why not just litigate? Right at this point,
(09:23):
I've been put to your point all the way up
in the nosebleeds, and it's worth hiring a lawyer and
fighting the fight, I would say, at least, And we've
had a couple that have had some litigation, but at
least in most of the lme's there's very high participation
and take up, which I think is a sign that
you know, collectively, the company and the lenders and the
advisors kind of thread the needle in the right way
(09:46):
where it's kind of good enough, where everyone's going to participate,
even if it's not equal treatment.
Speaker 2 (09:52):
So if we take a step back, when you think
about forming a group or representing debt holders, so how
early do you get involved and how quickly do you
try to form a group with a cooperation agreement?
Speaker 3 (10:03):
Two different things in my mind, and group formation, you know,
comes in many flavors. I think the reality is, and
I think everyone understands this. There's there's a lot of
movement early on the on both sides of the transom,
on the lender and on the borrowers side. But I
think on the lender side, and I think a lot
(10:24):
of credits are probably coming into people's visibility, probably you know,
sooner than is obvious, meaning you know, we'll be talking
to a very large lender in a particular credit. It's
on their internal watch list. Maybe it's still trades in
the nineties, it's got some macroheadwinds, you know, and dependent
(10:45):
candidly with the lum environment. Depending on who the sponsor is,
people may say, as soon as this trade's off, we
need to organize because we're worried the sponsor may be aggressive.
So there are different catalysts, but I would say generally speaking,
organization comes early. The reality is by the time something
hits you know, your guy's news wire or you know,
bankruptcy rags or whatever, you should assume that deal has
(11:07):
been staffed for a very long period of time as
an advisor, and so I think that has been the
case for a while. Cooperation agreements, I do not think,
despite everyone probably feels like you know, in every deal
we're out peddling a cooperation agreement, it's not one size
to it's all. There are plenty of deals where a
(11:27):
cooperation agreement doesn't make sense because it may limit your
optionality in terms of what you want to do and
without going too far down the transmit. But like we
did Tropicana earlier this year, and we never had a
cooperation agreement in that deal, and that wound up being
an enemy with a multi tiered approach like we've talked
about in other situations where you have you know, long
(11:50):
dated maturities, which by definition means that the company has
more time to play the games and needs to play
and lose documents. And perhaps a sponsor who's known for
not being afraid to use the room and their documents
and cooperation rooments makes more sense. But it is not.
It's not as easy as a decision as I think
(12:11):
maybe the outside thinks it is. It's something that people
ponder and debate as a group. I mean, we're having
a couple of debates on it this week on different credits,
whether or not it makes sense.
Speaker 2 (12:20):
So and when forming a group, do you try and
reach certain thresholds as far as owning a certain amount
of principle and whether in different parts of the capital
structure right so that you have the term loans, maybe
secured bonds on secured bonds, hold co OpCo or do
you look at some of the biggest bonds there and
try and get a obviously over fifty percent would be great,
But are the certain percentages where you feel you have
(12:41):
enough to go to the company and yeah.
Speaker 3 (12:44):
I think you hit. I mean, this goes back ten years,
long before the world of alomy. Just in the world
of like amendments and forbearance agreements and waving defaults when
we actually had covenants. The fifty percent, particularly in the
TLB market obviously, is usually the magic number that were
aiming for. I think sub fifty percent. You have to
think about it from the company's perspective, like what do
(13:05):
you really have to offer? Right, So in a traditional environment,
you know I could wave, I can forbear, I can amend,
I could do things to help the borrow or if
they get in a tough spot from a financing perspective,
In a document that you know doesn't have things like
support nation protection, I could provide new money on a
super senior basis with fifty one percent. And then in
(13:26):
the LME environment, you can provide amendments that may be
necessary to the documents to implement the LME. So look,
when you first start, a group might might be thirty
five or forty like sure, but I think realistically for
you to have bargaining power from the other side's perspective,
(13:47):
you should probably have north of fifty percent.
Speaker 1 (13:50):
Do you tend to represent these DICO or the restructuring group?
Speaker 3 (13:54):
Oh, that's a great question. So usually the way it
happens is there will come together first. It It should
be the largest lenders by definition, right, because they are
the ones picking advisors, bankers and lawyers, and usually at
least in my deals. Right Because to the point you
were making earlier, a lot of these things form early
(14:15):
and kind of sit around for a little while. A
STEERCO really only gets constituted at a time when things
are starting to move. So companies advisors reach out, they
send across an NDA to us and our banker they're
ready to talk. That's the time usually where you'll solidify
a steerco. It doesn't usually make sense early on in
an engagement to create that dichotomy because it's you know,
(14:38):
some of these deals some may just get refinanced and
nothing ever happens. Right, So there's not there's no point.
Speaker 1 (14:43):
Right, Okay. In general, valuations are coming down, you know,
the economy slowing their headwinds. How is that changing the
restructuring tools?
Speaker 3 (14:55):
I think I'm seeing that, you know, despite maybe some
pressed to the contrary, like what I'm seeing actually is
a decent amount of traditional restructuring uptick. Again, I don't
think LEM is going anywhere. I think that tool will
remain a great tool for candidly for sponsors and to
a lesser extent for our clients. But I have seen both,
(15:19):
you know, new deals that need to go traditional restructuring
because the problem is too big to solve through an lemy,
or there's a liquidity crisis that no one's going to
fund without fixing the balance sheet. And I've candidly had
you know, multiple of my old lems, and this will
be you know, to your earlier point the test of time.
I've had some old lem's come back that you know,
(15:42):
we did the lemy and the band aid kind of
slipped off in this environment, and it's probably going to
need to be a real restructuring this time.
Speaker 1 (15:50):
On the sponsor's side, are you seeing more than by
a bat that debts.
Speaker 3 (15:56):
Certain sponsors, I think certain sponsors that are more credit savvy,
like without naming any names, like some of the big
sponsors that are also big credit players in those situations,
we tend to see them be more astute too, you know,
particularly if they think things are just mispriced, you know,
going in and buying up a lot of you know,
sometimes a lot of the junior in debtedness, which obviously
(16:18):
is gonna be trading at the discount the most discount.
And then I've had situations some of which I'm involved,
now are you know? Unknowingly to us, the sponsor got
involved in the capital structure, and then when we came
to the table to negotiate a deal, they used it
as a leverage chip, right, like I'll take this debt
and subordinate it if you'll do X, Y and Z.
(16:38):
So I think it's it's definitely a play. I don't
think it's all sponsors though, I think it's a subset
of sponsors.
Speaker 1 (16:45):
What about sponsors stress more broadly? Are using situations where
there is stress spreading across the portfolio and how does
that affect sponsor's choice and what to do.
Speaker 3 (16:52):
You mean like one particular sponsor having a lot of
distressed names? Yes, yeah, I mean I think we probably
know who all those are. But yeah, I mean I
think the ones that have had a lot of distress
in their portfolios to deal with tend to be the
ones that are doing more of the leemy stuff, right
because they're trying to figure out a way to punt
things forward and give themselves a lifeline. Just thinking through
(17:16):
the things we have in the pipeline, Like, yeah, we
have the flip side of that is also true, though,
as I say it out loud, I mean, we have
some sponsors that are like you know, white shoe sponsors
that everyone knows, that have several troubled names in their
port co in their portfolio that historically have not engaged
in lemy and don't seem to be interested in engaging
(17:38):
in eleme. So it's really a mix bag.
Speaker 2 (17:42):
So the investors you work with, I think you mentioned
this earlier about putting new money in so just you know,
question is how willing are they often to invest more money?
Is it throwing good money after bad? I mean I
can think of a recent example where it's worked. Echo
Star Yeah great, right, Like so they well they did
two things, trying to do something with the DBS bond holders,
which they fought back on and that seemed to be
(18:04):
the right move. Give one of those DBS bonds traight now.
But the Echo Star convert holders not only did they
roll over their convert but they invested a lot of
new money with a large new bond. And now with
the recent spectrum sales, those bonds are up. You know,
I've done very very well. So it's just the willingness
for lenders to invest more money in a situation like that.
Speaker 3 (18:24):
Well, I mean Echo Store obviously was a great result,
and we know a lot of folks in that they're
very happy with the way that turned out. I think
in these situations, I do think, Look, all of our
clients are very savvy. They're not just going to pour
good money after bad for the sake of doing so.
And it's a function of in sometimes defensive capital right,
protecting your existing investment. I will say I feel like
(18:48):
on a personal level, just in the stuff I'm working on,
I've definitely seen more situations where investors have tapped the
brakes on writing the new check because they're concerned that
tier point they're just putting good money after bad. And again,
I think in those scenarios you got to look for context, meaning, well,
if we don't fund, what does that mean. And if
(19:10):
the answer is it means a desperate sponsor is going
to move whatever valuable collateral we have to fund it
and rip it out of our system, then it may
bring us back to the table, right, because the alternative
is not very great for us if it means you're
putting pressure on junior creditors in the structure or two,
well what have you and the sponsor to protect themselves
(19:31):
because the alternative is a bankruptcy where they get wiped out.
Then that's okay result if you're the senior lender. So
the playing board is set. I do think, I mean,
I don't think anything's changed, right. I think all of
our clients are extremely savvy and intelligent. They wouldn't just
write a check for the sake of writing a check.
I do think people are pressing back more though, on
(19:53):
situations where the company just comes and expects that the
senior lenders are just going to solve the problem for them.
Speaker 2 (19:59):
Yeah. And I guess there's certainly example where investors refuse
to take the haircut, right because again we go back
to Echo Star Wars, a very complicated situation, but they
were trying to I think that an agreement to sell
Dish dbs to direct TV for a dollar, but the
bond holders were required to were offered to swap into
a direct TV debt, which obviously would be a big
improvement and credit quality, but they were required to take
(20:19):
some very large haircuts depending on the bond and they
were refuse. I guess with certain cases will lenders be like, hey,
we're willing to take our chances if this goes bankrupt,
well restructure and we'll own it throughout the process ourselves.
Speaker 3 (20:32):
Yeah, I think that's very much the case. I mean, obviously,
without getting into any specifics, viv a situation now where
we've been there for a while. There's been on again,
off again discussions with the company and the sponsor. We
kind of hit pause on an ELM that we were
talking about months ago. The business has continued to deteriorate,
(20:52):
and I think the sponsor still is expecting the clients
to take a haircut. And I think that's a situation
where it's like, I know what the alternative is. It's
not great, but it also doesn't make sense for me
to give back forty cents in my face claim if
I think this thing is headed towards the bankruptcy. So yeah,
I mean that's a live deal I'm working on at
the moment. So I do think you're seeing some of
(21:14):
that pushback.
Speaker 1 (21:15):
I'll want you look at the secondary market's got I mean,
in terms of co op versus non co op trading.
Is that a signal that you look at.
Speaker 3 (21:21):
I mean, we're aware of it, and we have to
be cognizant of it and candidly when we draw drop
some of these co ops. You know, sometimes you got
to spend time with the trading desks on the phone
just to kind of get them familiar, because obviously the
clients want liquidity, and so if the co op is
strangling liquidity, that doesn't help our clients. And you know,
when we did al Tease right for example, I don't
(21:43):
think the European traders were too used to or not
used to it at all, dealing with you know, co
op versus non co op paper. So we spent enormous
amount of time trying to educate the desks to make
it as painful as painless as possible. Sorry painful, but
I would say we're cognizant of it. Again, I mean,
(22:04):
I don't know if we're going to get into this,
but there's multiple flavors of co ops nowadays. So in
a co op, we're ninety percent, you know, hypothetically of
the loan is under co op. The trading issue is
usually not an issue. In a world in which you
have a you know, fifty percent co op, then you
have a big trading disparity, and you know, we even
(22:25):
have some situations that that we recently and something I'm
involved in which was a head scratcher to me. We
had people calling us because there was a trading disparity
between the co op and the Steerco paper, which made
no sense to me because there was no there's no
way to delineate Steerco paper in these situations. So yeah,
I mean it definitely impacts trading. The punchline is if
(22:46):
we're doing it right, we're trying to make sure it's
as like what is possible, so it's not a hindrance
on our client's ability to trade. And trading disparity I
think is very much a contextualized issue, meaning if or
seeing a bifurcated deal coming, then there's a trading disparity.
If everyone thinks that this is a everyone's holding hands
and getting the same deal, there should not be a
(23:08):
trading disparity.
Speaker 1 (23:09):
So talk to us about Europe, Scott. I mean, I
know you spend a lot of time there, and you've
built up a team there and you you kind of
have good presence there. When I talked to people in Europe,
you know, even not that long ago, you know that
general sense is and I'm paraphrasing and probably crudely breaking
it down, but Europe is slightly more genteel judges won't
stand for the shenanigans that you get in the US.
(23:30):
Management has more exposure to personal liability, there's more concern
about reputational risk.
Speaker 3 (23:34):
Is that so I definitely think Europe is different. I
don't think you can take the American model and just
export it, so I think that's one hundred percent tro
and as the American I should definitely refer to the Europeans.
But from my experience, what I've seen is it is
a smaller sandbox in the sense of at least on
the lender side, right there's just there's less institutions, So
(23:58):
it's kind of hard to do one of these bifrikid
deals when these folks are working with each other in
every single credit historically, So there's less appetite for the
lender on lender of violence as it's been coined here.
And I do think there is reputational risk, but that
I mean that was the case here as well right
ten years ago. And I think most of the White
(24:19):
Chee sponsors, maybe minus one or two, have kind of
ripped off the band aid because I think they've discovered
that the markets are forgiving and have a short memory.
So what I would say is, do I see the
eleemy stuff moving to Europe? Yes? Do I see it
in the volume that we have here in the US? Know?
(24:41):
And do I see the more aggressive transactions that have
been implemented here in the US, you know, becoming commonplace
in Europe? Probably not, But I do think if you
just step back and think about it, same documents in
large measure, a lot of them are the same sponsors, right,
It's just their investments up versus the US, and what
(25:02):
you're seeing is on the same advisors, right, So you're
getting the same you know, without naming names. You're getting
the same lawyers and bankers hired in Europe for deals
that they do here. So it's not surprising that they
would potentially roll out a playbook that's worked. So it
remains to be seen. But I don't disagree with your
your your intro. I think that is very true.
Speaker 1 (25:22):
Are there places that it works better countries?
Speaker 3 (25:25):
Okay? Now, now we're going to get into my my
knowledge of the various geographies and overall lying fiduciary duties.
But I mean it is relevant right to your point
about because look, if someone's looking the challenge in element,
the first place, you look at the docs, right did
did they breach a covenant? Did they over blast the basket? Did?
(25:47):
The reality is you have very smart lawyers on both
sides of the table. For the most part, that's usually
a no. You could get creative with an argument, but
presumably there was room in the documents to begin with
to at least theoretically move an asset for example. So
the second place a lot of people go is okay,
is there a state law claim of action like a
fiduciary duty type claim or a fraudulent transfer type claim,
(26:08):
which obviously will vary by jurisdiction. So for example, when
we did SFRLTAST France and there are a lot of threats,
you know, as part of the negotiation about moving assets
away from us, my partner, John Pierre Fargus, who runs
my French office or my French restruction practice, who's best
in class there, felt very confident that from a fiduciary
(26:31):
duty liability standpoint, that that was a hollow threat versus
here in the US, we would take that threat much
more seriously. So those type of jurisdictional overlay issues are
very relevant. Whether it's France or Luxembourg or the UK
or Germany, it varies by jurisdiction. So yes, that comes
into play as well. I think the US has, you know,
(26:53):
the business judgment standards a little bit more protective of
the boards here.
Speaker 1 (26:56):
But you wouldn't say I'll go to Italy ol Spain
and we can get away with more stuff. For there's
not like a target on a particular country where things
are loose.
Speaker 3 (27:05):
I think there probably is. I won't speak to it
for obvious reasons, but I think there are certain jurisdictions,
you know, deferring to my colleagues overseas where they feel
there's I mean, we talk about these things with our clients. Right,
if it's in France, you probably can't do X. If
it's in Germany, you probably can't do Y. If it's
in Luxembourg, maybe you could do this. So it is
(27:25):
part of the conversation when we're thinking about how to
you know, roll forward a transact.
Speaker 1 (27:29):
It's more case by case than you know you're you
are beefing up massively in one country because you see
a huge amount of transactions in one place.
Speaker 3 (27:38):
I mean, right now, again from from the American practitioners perspective,
you know, I'm seeing a ton of distress in France
and we, luckily for US, we have a great practice there,
so we're doing a lot of it. So like, are
we in France in a big way because there's a
ton of distress? Yes? Is that because we think it's
a leemy friendly environment? No? Actually, probably the inverse is true.
Speaker 1 (28:04):
So it's also a question of scale. How much does
that act as a deterrent the deal? The deals relatively
much smaller than they are in the US.
Speaker 3 (28:13):
Right in the capital structures, yes, yeah, I mean for
the for the most part, that's true. I mean, but
if obviously SFR was a massive capital structure. You know,
it's public that we're involved in multis International, it's another
massive capital structure. So there are some big ones, but
you're right, I mean, there's less multi billion dollar structures
than we deal with here in the US.
Speaker 1 (28:32):
And other than the fact that cop agreements work, which
you're a big advocate of, what are the lessons do
we learned from Maltese?
Speaker 3 (28:39):
So, and just to pause on that, I think co
op agreements are legal to go to a discussion earlier,
and I think they're appropriate in certain circumstances. I don't
think that there and I said it earlier, I'll say
it again. I don't think that they're one size fits all.
I think there are times sometimes when actually our clients
want to rush to a co op, where maybe we
should let things play forward to see if it makes
(29:02):
sense contextually in that circumstance. In SFR, it made a
ton of sense to me. That was a little bit
more of a no brainer. You had a massive capital structure.
You had a company who came out who basically said
telegraph they were looking to capture discount. And you had
lenders within our syndicate who were US holders, Euro holders,
(29:25):
you had power holders, You had people that bought in
at a steep discount. So you just had varying degrees
of thought processes from their own internal perspective. And I
think had there not been a co op, given the
size of that structure, it would have been very easy
for the company its advisors to go pick off large
holders and do things to pit holders against each other.
(29:47):
So in that one it made a lot of sense
to me. No one was looking to do an enemy
off the backs of someone else, and that deal which
printed was one hundred percent pro rata. Everyone in the
secured group got the same deal, So that made a
lot of sense. In other scenarios where you have really
big lenders, you know, paper straining as deep discount, they
(30:10):
may want to put money to work, you know, rushing
out with a big co op may cut against their interests.
Speaker 1 (30:16):
Just going back to Europe, how's the build out of
your business going. You've hired some people, you're hiring more.
Speaker 3 (30:21):
Yeah, it's going great. In the US. I mean, we've
been plugging away for a while and have been extremely
busy for years. Knock on wood, we haven't you know,
we haven't had a lull on a on a personal level.
So two things. One is, obviously the market has changed.
I've been doing this roughly twenty five years and it's
(30:41):
changed drastically in the last five and luckily we were
part of that change as opposed to reacting to it.
And that is this whole change to eleemy being you know,
a precursor and sometimes a substitute for a change of
control type transaction. So you need more lawyers that know
how to do that work. And it really is finance
(31:02):
heavy and not all bankruptcy lawyers, certainly when I started
my career twenty five years ago, were heavily trained to
focus on every nuance at credit docs at a young age,
and so we've really changed our training as it relates
to our up and comers, and also are recruiting. So
(31:23):
a lot of the hiring I've done in the last
two years have really been heavy finance folks, not people
I would call traditional restructuring lawyers, not the folks that
throw in a suit and tie and go to court,
but the ones that could dig into a credit agreement
and come up with a host of options for our clients.
And I'll continue to we can never have enough bench
as it relates to people with that skill set. Separately,
(31:46):
a big personal goal of mine was really to build
out the European practice because in my mind I could
see this work that we do here spreading to Europe again,
not necessarily the same level of intensity or aggressiveness that
you see in the US, but but versions of it.
(32:08):
And you know, most of our clients that you know
we'd rely on here for new work are the same
people that play in Europe. So to us, it was
a natural progression to try to continue that relationship overseas. Historically,
we always had a very deep team in places like France,
so that was easy. In Europe, we were good, but
(32:29):
we needed more, I mean honestly, and so we went
out and we uh and that's a tough market to recruit,
and I mean it's just it's a small, finite universe
of people that are super relevant and everyone wants those
samful of people. So we were able to pull off
a pretty big acquisition earlier this year. We brought in
the leader of senc's restruction former snce's restructuring practice and
(32:54):
finance and a host of associates game with them, which
was a huge bolster to our group in London. And
I would say, I'm not done there. There's more to come.
Speaker 1 (33:02):
And more in other countries in Europe.
Speaker 3 (33:04):
Yeah, one hundred percent as well, And there's one in
particular that will be coming soon. But the jurisdiction is
so small. Stay away from avoiding.
Speaker 1 (33:11):
But again, if I'm sitting in Milano, Madrid or Frankfurt,
why why give some done? I mean, why not just
go to my guy that I've been talking to for decades,
that you know, speaks my language. He's been sitting there
from the front of.
Speaker 3 (33:22):
Me, from an advisor front, or from a client front.
Speaker 1 (33:24):
From a you know, if I want to get a
little fun to do this sort of why do I
need to go to give some done.
Speaker 3 (33:29):
Well for this sort of work. I mean, my honest
pitch for that, because I think it rained true, is
we've just done more of it than anyone else, and
so there's a certain level of sophistication that we have
just having dealt with all this stuff for the years.
And I think if you think about you know, deals
like Altice, which was an lum in Europe, it was
(33:49):
a combination of my French practitioners who are best in
class and kind of know that market in the nuances,
and then us taking the technology that we've been doing
here forever and kind of transplanting it with the with
the benefit of our French partner's you know, advice to
make sure we're not hitting any guardrails and transplanting it.
So I think that's you know, the pitch, so to speak.
(34:12):
I think it's there. There's something that is said if
you even look at the US market, there's really a
subset of law firms both on the company and on
the lender side that do all of this. So I
think it's it's a natural progression to take that expertise
and to bring it to your clients overseas.
Speaker 2 (34:31):
And then when when you're representing debt holders and you're
dealing with a company, is there any difference in the
type of company, For example, if it's a sponsor private
equity held equity for the most part, or it could
be a company that's got a very influential founder like
we talked about Echo Star with Charlie organ or or
dealing with a more widely held public company.
Speaker 3 (34:53):
Uh. Yeah, I mean there's definitely a difference in my
mind between public and private. You know, I don't think
you've really seen much of any public style le me right,
because if you think about people's motivations to do these transactions,
if you're a sponsor of the motivation is pretty obvious
to do one of these transactions to get more time,
to hopefully get a return to your LPs, to not
(35:17):
have to write down an investment, etc. I mean, obviously,
if you're dealing with the company of public shareholders, I
mean they're still benefit people are fiduciaries to their public shareholders,
but you usually don't have like one united voice so
to speak, pushing in this direction. I do think, I mean,
we have some stuff in the pipeline and in the
work so to speak that are public, so we'll see
(35:40):
if we kind of finally cross that transom. But I
think for the most part, just given you need another
party to transact with who's motivated, I do think that
most of the stuff will stay on the sponsor side.
Speaker 1 (35:53):
I want to ask you it's about the concept of
m blockers and omni blockers. A recent guest, Sabrina Fox Legal,
said that they should be on all deals. Essentially, this
is anti lem language and the documentation saying the borrow
won't use terms to subordinate lenders kind of umbrella protection
against the range of lemies. Is that a viable option
when it catch on to you seeing any of those
(36:13):
at all.
Speaker 3 (36:14):
Well, there are I mean that's a generic leemy blocker term.
I mean, if you look at deals nowadays, there's things
like sort of protection or j crew protection or chew
WE protection, some of the more famous lemies that are
out there. And I think it goes to the whole
commentary we're having before, is like in the syndication process,
(36:37):
how much leverage do folks have on the front end
to get those kind of protections in the document. You're
seeing more and more of them. You're seeing things like
J crew protection in documents. That being said, right, it's
a cat and mouse game. You'll see a version of
J Crow protection and then someone on our team will
take a look at it and be like, I've figured
out a way to navigate around it. So I think
(36:58):
you are seeing some documents on the primary issuing side
where some of these protections are getting in. Where they're
really finding their way in is post Lmy. So people say, Okay,
I'm doing this deal because you have leverage against me,
because you have this optionality under the document. However, you
know I'm shutting the door, right. So on the back
end of this deal, we're going to close everything off.
(37:19):
We're going to have every protection. We're going to tighten
down your baskets, we're going to tighten down your r
peak capacity, et cetera. And So what's interesting is you're
now seeing a lot of people in the secondary market,
and I talk to clients all the time that are
very interested in buying the post Elmy paper in the
marketplace because that they know is protected paper. Look if
(37:41):
on the on the front end of an underwriting process,
if if lenders were able to advocate and get in
real enemy protections and all these documents, we could just
go back to being restructing lawyers. I'm not seeing a
change anytime soon.
Speaker 1 (37:56):
And that hasn't died restructing laws.
Speaker 3 (37:58):
There was a yeah. I rolled my eyes a little
bit at that. No, I don't think it's died. I
think the markets changed. My honest view is what's happened
is instead of this being kind of a one step
process when you need to recapitalize or fix a business,
it's almost become a two step process. The lemy comes first,
and if the enemy sticks, there never is a part two.
(38:20):
So maybe that kills the restructuring lawyer. But I think
what we'll probably see over time and time will tell
is that it won't stick in a decent percentage of
these and you'll still have the restructure. So so now
I'm not a I'm not a believer in the line.
I thought that restructuring lawyers are dead, But.
Speaker 1 (38:34):
The real Senate would just say it's another way of
the lawyers getting paid twice.
Speaker 3 (38:37):
I mean that it's a cynical look at it, but
it happens to be true. I mean, it's it's two
bites at the apple, so to speak.
Speaker 1 (38:44):
If it's required, so talk about the pipeline. You do
expect these things to come back lemies, you know, is
it coming back strong in the in the in the
fourth quarter, does it continue into next year? Do you
see a good you know, wide range of sectors involved
in times of businesses?
Speaker 3 (39:01):
Yeah, so I would say it's it's definitely ticking up
a bit. I think everyone kind of took a deep breath, candidly,
because I feel like so many of our clients and
again it's the same players, and all of these deals
just had one after the other after the other and
probably had enough, so to speak. I don't think from
talking to my own clients that they've gone anti eleemy.
(39:24):
I do think perhaps sponsors have to make a better
case to the lender community as to why in a
particular credit it makes sense for them to engage on
lem I don't think it's just because the debt's trading off,
So I think there's maybe a little bit more of
a dance that needs to happen on both sides of
the table. Yeah, I think there will continue to be,
(39:49):
you know, a large amount of enemy rolling into twenty five.
I don't think that's going to change. I don't know
that it's sector specific per se, but certain sectors which
are struggling, whether it's chemicals or what have you at
the moment, are more prone to it just because their
securities pricings are trading off. Right. So if you have
(40:10):
a bunch of companies in the same sector and they're
all trading in the sixties, I think you might see
a lot of enemy in that particular sector. But I don't.
I think it has more to do with the trading
volumes and the trading prices than it has to do
with you know, advisors, you know, at targeting a particular sector.
Speaker 1 (40:26):
But rolling into twenty six you said twenty five.
Speaker 3 (40:29):
I'm sorry, yeah, finish twenty fifth. It's been a long year. Yes,
I mean, I think realistically it'll it'll continue to roll in.
Speaker 1 (40:34):
And it's the US, it's Europe, it's.
Speaker 3 (40:36):
I think so I mean, I I us I think
is is you could take for granted that you'll continue
to see high volume of enemies here. I think everyone's
used to it, and sponsors are kind of gotten used
to it as well, maybe less concerned about the reputational hit. Europe.
I think you've seen a couple posts SFR, not on
(40:57):
the same scale or size, So I think think you'll
continue to see them in Europe again, you know, for
all the reasons we discussed earlier. Do I think it
becomes the snowball that is the US now? Do I
think you'll see more of them with some of the
same players in Bob, Yes, but.
Speaker 1 (41:13):
You are global, why not Let's time? Why not Africa,
Middle East? Asia?
Speaker 3 (41:17):
We don't have offices in all those places, so that
could be the next thing venture Why Yeah, I think
I think we'll probably we'll stick to to Europe for
the time being. In the US, I mean, we'll see
if this becomes becomes a trend anywhere else. But I think,
you know, in certain of those jurisdictions, it's just restructuring
per se is not as much of a developed practice
(41:39):
as it is in US and Europe.
Speaker 1 (41:41):
And basically the aggressive you know, the enemies in the
US just get more aggressive, do they more cut throat?
And Europe joins in.
Speaker 3 (41:49):
So I think the opposite is true. I think the
enemies in the US have actually tried to be more inclusive.
I mean, you know, without getting into it because we're
involved in some of them. But if you look at
like the twenty twenty type transactions during COVID of like
sort of and Trimark and board riders that were truly
non Parada, I think the market had shied away from those.
(42:09):
They've tried to create a a a structure where everyone's
incentivized to participate. And you know, from our perspective, you know,
a good enemy is obviously one that staves off a
change of control in the long term into your you
know examples of ecro Store and these other ones where
on the back end there's a recovery and our clients
(42:31):
do very well economically, that that's the best enemy. But
I think in the short term, because none of us
have a crystal ball when when we think about what's
a good enemy that we just closed, you know, having
very high take up and participation is is good in
our minds as advisors at least because it means we
created a mouse trap that worked that people you know,
kind of played with. If if you have a huge
(42:53):
amount of holdouts, probably not a great enemy, and.
Speaker 1 (42:56):
The client understands that and respective that they're don't just
trying to get every last dollar rounds, but they actually see.
Speaker 3 (43:01):
Oh, they one hundred percent understand the playing field. I mean,
if you think about it, if fifty percent of you know,
talking about the fifty percent figure before, fifty percent of
people just went in the room, cut a deal and
took all the goodies for themselves, you'd have forty nine
percent not participating, right, even though they theoretically got a
better deal. That that's all of our clients are smart
enough to know that's not that's not a win, that's
(43:23):
a litigation or even worse, you know, a company just
faltering and falling down into a bankruptcy. So yeah, clients,
clients totally get that. You know, you might be able
to do a little bit better, but you know you
need to leave enough where people want to participate.
Speaker 1 (43:38):
Great stuff, Scott Greenberg with Gibson done. Many thanks for
joining us on the Credit.
Speaker 3 (43:42):
Edge, Thanks for having me, Thank you, and.
Speaker 1 (43:44):
Of course very grateful to Steve Flynn with Bloomberg Intelligence.
Thank you for joining us today.
Speaker 2 (43:48):
Great to be here. Thank you for even more.
Speaker 1 (43:50):
Credit market analysis and insight. Read all of Steve's great
work on the Bloomberg Terminal. Bloomberg Intelligence is part of
our research department, with five hundred analysts and strategies working
across all markets, coveraging over two thousand equities and credits
and outlooks on more than ninety industries and one hundred
market indices, currencies and commodities. Please do subscribe to The
Credit Edge wherever you get your podcasts. We're on Apples,
(44:11):
Spotify and all other good podcast providers, including the Bloomberg
Terminal at b pod Go. Give us a review, tell
your friends, or email me directly at jcrombieight at Bloomberg
dot net. I'm James Crombie. It's been a pleasure having
you join us again next week on the Credit Edge
Host
James Crombie
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