Liability management is becoming the go-to option for companies in search of a lifeline, looking to capture a discount or seeking to avoid formal restructuring.
Once seen as novel, transactions that leverage flexibility within existing debt documents to create refinancings, unlock fresh capital, and take advantage of other opportunities, are now familiar in the U.S. and no longer uncharted territory in Europe.
With techniques such as the double-dip, drop-down, and uptier exchange becoming well entrenched, the nature of the conversation is changing. Companies and lenders that have made a success of liability management increasingly recognize that securing an extension of runway is not an end in itself. Instead, it is best deployed as part of a holistic exercise that aims to resolve – rather than paper over – the underlying causes of financial pressure as part of a comprehensive turnaround or transformation.
But why the rise in popularity? Is liability management significantly different from other financial management strategies deployed over the years? And how can true business benefits be realized, beyond merely extending maturities and re-carving up an existing capital structure?
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