1. With a bullish start to the year for the LevFin market, how healthy is Akin’s distressed pipeline? Are you busy?

We’ve had a busy start to 2024, and our pipeline going into the year is definitely healthier than it was 12 months ago. There are a number of companies with upcoming maturities and some very large capital structures in the European market that are getting a lot of attention from both existing par investors and secondary distressed investors. Interest rates and over-levered balance sheets will continue to make refinancing difficult for a number of European companies and alternative solutions for dealing with upcoming maturities will be needed.

2. Where do you see the biggest opportunities arising in the distress market over the next 12 months?

The debt collectors have fallen out of favour with investors and are a key area of focus. European real estate continues to provide opportunities as do the healthcare, chemicals and telco sectors.

Credit funds looking to deploy new money as part of a liability management solutions are increasingly focused on large capital structures with significant basket capacity and 2024 may be the year when we start to see more US style priming and drop down transactions. We are being asked to spend significant time considering how companies could use liability management transactions to deal with liquidity and/or maturity issues through two lenses – either from the viewpoint of existing lenders that want to understand what can be done without their consent and how coercive structures could be used to their disadvantage, or from the viewpoint of new money providers looking to inject fresh capital. Larger balance sheet restructurings have been seen and will continue to be seen but these continue to be the exception rather than the norm.

3. What distinguishes Akin’s restructuring practice from other law firms and what are some of your key achievements over the past 12 months?

Akin has one of the longest standing restructuring practices in the London market — we were one of the founding practices in the European restructuring market when it got going in the 1990s. Many of our eight dedicated financial restructuring partners have worked together for over 20 years and our team has both fantastic bench depth and breadth, with the additional benefit of restructuring specialists in our finance, corporate and litigation teams. 

We are a very partner-led and collaborative team so clients get the benefit of significant experience and partner focus on all deals from the beginning right through to the end. Key achievements for our team in the past 12 months include advising on two very significant cross border restructurings: Cineworld and GenesisCare, successfully advising the creditors on the first appeal of an English restructuring plan in Adler and developing a specialist area in sanctions related restructurings and special situations transactions including on Veon and Fortenova.

We are also delighted to have added two exceptional partners to our team — Emma Butler as an internal promotion and Jacquie Ingram as a lateral hire.

4. With increasing scrutiny and criticism of whitelists, chiefly that they’ve created illiquid distressed situations, what’s your view on them and possible legal challenges?

Whilst par lenders may prefer to sit around the table with like-minded investors in the context of a restructuring or A&E, my sense is that the primary investing community now recognises that whitelists can be detrimental to their ability to manage their positions proactively as borrowers head towards distress. I think this was brought sharply into focus in the context of Genesis Care which unraveled very quickly and left the original par investors in an invidious position.

For groups needing liquidity quickly, the existence of whitelists are a practical bar to investors that are able (and want) to write new money cheques from entering the investor base. So, in short, whitelists are generally disliked by everyone other than the sponsors.

My own view is that they are bad for the market and are creating zombie companies in Europe. In terms of challenges to the whitelists, we are aware that certain investors are highly focused on the issue so this is clearly something to watch in 2024.

5. With an increase in disputed restructuring processes Europe-wide, how do you rate the UK restructuring plan’s ability to handle these contentious deals and how could it be improved? Has the Adler judgment (and subsequent cases) clarified or muddied matters?

The English court system is one of the best in the world and our judges are well equipped to deal with contentious restructurings. We are definitely predicting an increase in challenges to Restructuring Plans (owing primarily to the use of the cross-class cram down powers in the legislation) and the legal community generally welcomes those challenges as they incrementally add to the growing body of case law which, in turn, increases legal certainty. 

The Court of Appeal judgment in Adler was an important milestone in that respect, and we now know more about what can and can’t be done in a cross class cram down context, as well as the Court’s expectations around timetables and access to information.

The contested plans that have been sanctioned since the sanction of the Adler plan was overturned have only added to our understanding, and the growing jurisprudence is certainly welcome. Going forward, additional clarity on expectations around disclosure and timetable would be helpful as this is one area where challenging creditors remain at a significant disadvantage.

6. The cost of restructurings has received increasing focus. Is being broke too expensive and how can the restructuring community address this?

As capital structures have got more complicated, it is inevitable that restructuring them would also become more expensive. Brexit has further complicated matters as recognition of English Schemes of Arrangement and UK Restructuring Plans is less straightforward. Similarly, the implementation of new restructuring processes across Europe has opened up options that were not present before and local courts are keen to get a greater share of the ‘restructuring pie’.

Unfortunately (or fortunately with my English lawyer hat on), the Rule in Gibbs results in parallel processes being needed which adds to cost and complexity. Interestingly we have heard some market participants in the US query whether UK processes should be favoured over a US chapter 11 due to the very material costs we see in US restructuring cases.

In terms of what can be done to reduce costs — consensual transactions will always be cheaper than contested ones so engaging early with a proposal that respects legal rights and remedies, alongside collaborative and cooperative sharing of information, will help.

7. How do you think the relationship between lenders/bondholders and sponsors has shaped recent restructurings and even the documentation underlying certain financings? Does preserving relationships come before deleveraging/rescuing distressed corporations?

Investors are under significant pressure to deploy capital and, as we know, this impacts their willingness and ability to push back on terms at primary issuance. However, it is also clear that sponsor relationships can factor into restructuring negotiations; in some cases aiding more consensual solutions, in others leading to more adversarial negotiations.

Lenders are keenly aware of the need to balance the competing demands of maintaining strong relationships in the market, whilst being mindful of their duties to their own investors, and have been successful in maintaining this balance. In recent deals, there has been an acknowledgement from the sponsors that they need to contribute or “buy back in” to maintain their position in A&E transactions and restructurings, but what we are starting to see is some of the sponsors pushing the boundaries of this by using priming tranches, or taking strategic assets as collateral. Lenders will likely face a tougher balancing act as sponsors get more aggressive.

8. What advice would you give to women who are newly-qualified solicitors and are thinking about a career in restructuring?

Do it! Being a restructuring lawyer is great — it’s a perfect mix of law, transactional work and strategic advice. Deals are fast paced and interesting, and you never quite know how things are going to turn out (in a good way!). There are now lots of female lawyers in the restructuring market, both in private practice and in-house, so it’s a great community.

Importantly there are also an increasing number of senior female partners who are having successful careers whilst juggling having families and having fulfilling lives. Hopefully having role models in the industry helps and allows there to be open conversations about how junior associates want to manage their careers — whether that is to stay in private practice and push for partnership, move in-house or go down another path. We are very proud to have 50% female partners in the Akin restructuring team — diversity is a great thing!

9. For the last question, I want to know one thing in your life you can’t live without, one thing that you could do with less of, and one thing you want to get rid of entirely?

Can’t live without Pepsi Max — have been a loyal and daily supporter for over 30 years. Could do with fewer emails — the sheer volume is relentless. Would love to get rid of white lists…