Analysis: Struggling Businesses Sharpen Debt Tactics, Just in Time for a Downturn​​​

As recession fears amp up, struggling businesses have one thing working in their favor: They have never been more adept at reordering their debts to avoid bankruptcy, WSJ Pro Bankruptcy reported. U.S. companies have been engaging in liability management exercises (LMEs) that raise fresh capital and extend debt maturities while avoiding the expense of chapter 11. A wave of LMEs in recent years has kicked the can down the road for dozens of struggling borrowers, pushing the rate of corporate bankruptcies down to historically low levels. Now, a new generation of friendlier, more inclusive LMEs has sprung up that minimize the risk of investor lawsuits and help troubled businesses stay afloat longer. While a recession could further stress corporate balance sheets, the improvements in financial engineering and the amount of capital available to get LMEs done provides a hedge against the risk of widespread bankruptcy filings, market participants said. “It used to be that you’d see one or two of these liability management transactions a year and they were controversial and headline-grabbing,” said Scott Greenberg, a leading liability-management lawyer with the firm Gibson Dunn & Crutcher. “Now it’s one or two a week.” LMEs — a fancy term for distressed-debt exchanges — have reshaped the big-dollar world of corporate credit. Ordinarily, they are driven by a subset of a company’s top lenders, often reallocating collateral rights at the expense of the excluded minority. The number of LMEs totaled 15 in 2024, up from six in 2023, according to data from S&P Global. Early LMEs were plagued by legal challenges that limited their usefulness to companies like mattress-maker Serta Simmons Bedding and aerospace supplier Incora, both of which wound up in bankruptcy. Court rulings have also put limits on borrowers’ ability to favor some lenders over others.  Read more.

Adjustment of Certain Dollar Amounts Applicable to Bankruptcy Cases, Effective April 1, 2025​​​

On April 1, 2025, automatic adjustments will be made to dollar amounts stated in certain sections of titles 11 and 28. The revised dollar amounts were published in the Federal Register on Feb. 4, 2025, Vol. 90, No. 22 at pages 8941-8942. (NOTE: The Federal Register issued a correction on Feb. 24, 2025 - click here for details.) The adjustments will apply to cases commenced on or after April 1, 2025.

There will be changes to several Official Bankruptcy Forms and two Director’s Forms to reflect the adjustments:

• Official Form 106C, Schedule C: The Property You Claim as Exempt;
• Official Form 107, Statement of Financial Affairs for Individuals Filing for Bankruptcy;
• Official Form 122A-2, Chapter 7 Means Test Calculation;
• Official Form 122C-2, Chapter 13 Calculation of Your Disposable Income;
• Official Form 201, Voluntary Petition for Non-Individuals Filing for Bankruptcy;
• Official Form 207, Statement of Financial Affairs for Non-Individuals Filing for Bankruptcy;
• Official Form 410, Proof of Claim;
• Director’s Form 2000, Required Lists, Schedules, Statements, and Fees; and
• Director’s Form 2830, Chapter 13 Debtor’s Certifications Regarding Domestic Support Obligations and Section 522(q)

Read more.
 

Subchapter V Experiences to Share? ABI Wants to Hear from You!

ABI is continuing its study of Subchapter V, and it needs your help! We are particularly interested in learning more about the real-world impact of Subchapter V. So our question is, do you have a story about a distressed business or creditor who has used or benefited from the subchapter? If so, could that case still happen under the lower debt cap for Subchapter V debtors? Any and all responses are welcome. Submit your story at https://abi.org/subvstories.
 

Private Credit Firms Are Pushing Boundaries to Win Large Deals​​​

Credit spreads are among the tightest they’ve ever been for the industry’s best borrowers, with private loans recently pricing as low as 4.5 percentage points over the Secured Overnight Financing Rate in the U.S., and 4.75 percentage points over Euribor in Europe, Bloomberg News reported. Meanwhile, hopes that the Trump administration would bring a renewal in mergers and acquisitions haven’t yet materialized. “Spreads are in across the board this past year as private credit managers continue to replace bank financing in increasing scale, especially for higher leveraged, larger credits,” Matt Douglass, chief executive of PGIM Private Capital, told Bloomberg News. Private credit deals generally offer a premium on spread for illiquidity. But the availability of capital has driven down spreads from peak underwriting times. Average direct lending spreads were as high as 675 basis points over the Secured Overnight Finance Rate in March of 2023, according to a J.P. Morgan report from February. This January, according to J.P. Morgan’s and KBRA DLD’s data, average spreads were 500 basis points over the Secured Overnight Financing Rate. Read more.

Signs of an Office Market Bottom: ‘The Worst Is Probably Over’​​​

For office landlords, a bad dream that began in March 2020 seems to finally be nearing an end — but only if you’re in well-located, high-end properties in major U.S. markets, the New York Times reported. Sales of office buildings across the country totaled $64.3 billion last year, up nearly 21 percent from 2023, according to MSCI Real Assets, a provider of commercial property research. In central business districts, which have suffered from empty buildings and streets long after pandemic stay-at-home orders ended, the pickup was even faster. Leasing activity is also gaining momentum, according to a report by CBRE, a real estate services firm: In 2024, 6.5 million more square feet of U.S. office space was leased than vacated, the highest amount in any year since 2019. In newer offices in higher-cost markets, like New York, Silicon Valley and Austin, Texas, the average asking rate of $65 per square foot was up nearly 17 percent from the previous year, according to JLL, a real estate services firm. Read more.

Slightly More Americans Applied for Unemployment Benefits Last Week, but Layoffs Remain Historically Low​​​

Slightly more Americans applied for unemployment benefits last week, but layoffs remain historically low, the Associated Press reported. U.S. jobless claims filings rose by 2,000 to 223,000 for the week ending March 15, the Labor Department said Thursday. That’s just less than the 224,000 new applications analysts forecast. Weekly applications for jobless benefits are considered a proxy for layoffs, and have remained mostly in a range between 200,000 and 250,000 for the past few years. The four-week average, which evens out some of the week-to-week swings, inched up by 750 to 227,000. The total number of Americans receiving unemployment benefits for the week of March 8 rose by 33,000 to 1.89 million. Read more.

ASM Panel Spotlight: Economic Impact of Current Trends in Politics and Policies​​​

Domestic and foreign economic policies (and potentially laws and regulations) are undergoing a seismic shift, leading to increased uncertainties and greater market volatility. A key Annual Spring Meeting panel will consider the business impacts of tariffs, trade policies, tax reform, changes in the regulatory environment, and disruptions in both the public and private sectors. Given the rapid pace of proposed and actual changes, this discussion will focus on current events — with a healthy amount of prognostication — to explore areas of increased or potential financial distress. Register today! 

Application and Nomination Period for ABI’s 2025 “40 Under 40” Open Through June 30​​​

The ABI "40 Under 40" annual program continues to highlight the best up-and-comers in the industry. If you are, or know of, a dynamic insolvency professional who is committed to growth and excellence both professionally and in your community, this is one opportunity not to be missed! Applications are due June 30. Click here for more information and to submit a nomination or application. 

Access All Current ABI Titles Through ABI’s New Digital Book Subscription!​​​

One of the best collections of bankruptcy books is now available as an annual digital subscription! ABI’s bankruptcy library opens the door to a constantly evolving area of the law, and our books are continually being updated by top industry professionals. Auto-renewing annual subscriptions guarantee immediate access to this invaluable resource, which is comprised of fully searchable content that’s always available on any digital device. Convenient pricing plans for individual and institutional subscribers offer immediate and unlimited access to our entire digital library of books — nearly 100 treatises! Plus, you get advanced access to new and revised books as soon as they are published — all included in your annual subscription. Learn more!

Have an Idea for a Topic for an ABI Conference Session? Submit Your Proposal via ABI’s “Call for Abstracts” Page!​​​

ABI has launched an online portal for professionals to submit proposals for educational sessions at future ABI conferences. Submitters can describe their proposed topic, outline the session’s focus and learning goals, suggest speakers, and provide contact information via the portal’s detailed form. The portal can be accessed here.

All submissions will be reviewed by an internal Education Committee, which will contact the submitter to ask questions as needed and to discuss the status of the proposal. Submissions will be reviewed on a rolling basis.

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