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Michael Torkin joined Linklaters in August as the head of US capital solutions and special situations based in New York to help the predominantly European-focused restructuring group expand its offering in the US.

He comes from Simpson Thacher, where he founded the private capital and special situations investment group. During his career, he has been an innovator in corporate restructurings, including as a pioneer of defeased asset run-off transactions, or DARTs; has worked on cross-border transactions across nearly a dozen different restructuring regimes; and has represented investors and public companies including Ingersoll Rand, Crane Corporation, ITT Corporation and BorgWarner.

1. How has the cost of bankruptcy started to impact how companies, sponsors and creditors view their restructuring options in the US?

The cost of Chapter 11 has become a gating consideration — particularly for sponsor-backed or mid-market companies. Legal fees, advisory costs, and procedural inefficiencies can quickly erode recoveries and shift negotiating leverage. As a result, we’re seeing a dynamic shift to out-of-court solutions: uptiers, drop-downs, exchange offers — mechanisms that, while sometimes controversial, can achieve restructuring objectives without the frictional drag of court supervision (at least in the short-term). And, in instances where the sponsor has reached the conclusion that continued devotion of its valuable resources to an asset that will not produce an equity return, and out-of-court transition of ownership to the lender group.

Sponsors, rightfully, are focused on maintaining control and maximizing optionality. They are increasingly proactive — engaging creditors early, deploying fresh capital themselves or through private credit partners, and structuring transactions that can be executed expediently and with precision. From the creditor side, particularly among credit funds, there’s a strong preference for transaction certainty and reduced execution risk. Litigation in Chapter 11 is become expensive, unpredictable and, in many cases, value-destructive.

The market has responded accordingly. We’re seeing tighter documentation, and the strategic use of blocking positions and drop-downs to pressure holdouts; and where a chapter 11 is necessary, many are structured as prepacks or pre-arranged sales. As it relates to in-court restructurings, increased scrutiny around venue selection and expedited timelines have made parties more cautious in pursuing Chapter 11 unless there are no other practical alternatives.

2. You’ve been creative in out-of-court restructuring to help industrial companies defease their legacy asbestos exposure in processes, DARTs, that could informally be called non-bankruptcy Texas Two-Steps. You advised on this for companies including Borg-Warner, ITT, Crane, Gardner Denver and more. How did this structure come about and what are its limitations?

The structure evolved out of necessity. We were advising clients — industrial businesses with mature balance sheets and legacy tort exposure — that were fundamentally solvent but facing indefinite litigation tails. Bankruptcy was a non-starter for these companies, yet they needed a durable solution. So, we developed a corporate transactional alternative to isolate the liability: create a separate legal group to house the asbestos liability, capitalize it appropriately (both by buyer and by seller, to align incentives), and transfer it to a credible independent liability resolution platform, an LRP. Depending on the facts, the structure may be viable for a more financially stressed business that must restructure to avoid the cost and procedural complexities of a Chapter 11 case.

In any situation, the linchpin of the structure is integrity — the carve-out of existing business needs to be done with the utmost care, robust corporate governance, ample capital and other financial resources and instruments, and the transaction must withstand scrutiny under applicable fraudulent transfer, successor liability and veil-piercing doctrines. LRPs specializing in mass tort management play a crucial role — they provide claims resolution expertise, operational credibility, and capital. 

From a board perspective, it’s key to transact with an LRP with deep sophistication and experience in managing claims, negotiating settlements, and litigating when appropriate; one that will be a credible steward of capital for claimants and a long-term reliable counterparty. Importantly, we have not seen a change in settlement values or litigation as LRPs and plaintiff firms continue to negotiate settlements in the ordinary course, and at times more efficiently.

That said, there are limitations with the structure. The seller doesn’t obtain a court-approved channeling injunction, so there’s no statutory finality (which, as a practical matter, is becoming more difficult to obtain). It’s a solution that demands credibility, cooperation, and precise corporate tax planning and execution — so in the right context, it can efficiently resolve legacy liabilities without resorting to a costly and uncertain Chapter 11 process.

3. Beyond these notable tort-related structures, your experience in restructuring spans three decades, and during that time you’ve commented that there have always been out-of-court restructurings. What did they used to be like and how have things evolved?

Out-of-court restructurings used to be a matter of relationships. You’d gather senior lenders around a table — primarily banks — and work out a forbearance or amend-and-extend package. Documentation was lighter, creditor bases were more homogeneous, and the goal was to preserve the business, not to maximize litigation leverage.

That world has largely disappeared. Over the last decade, we’ve seen a dramatic shift, particularly post-TXU and Caesars. The creditor universe today is dominated by institutional capital — hedge funds, private credit, direct lenders — with varying risk appetites and divergent return profiles. The result is a fundamental change in strategy and execution. Documents are now mined for asymmetries in a much more exhaustive manner than ever before (at times, exploiting concepts that were not necessarily intended at the time the documents were negotiated); and restructurings are engineered around structural and documentary leverage, rather than negotiated as a matter of consensus.

This evolution has brought complexity, but also creativity. Techniques like uptiers, non-pro rata exchanges, extend and exchanges, and drop-downs were born from this shift. The techniques allow for highly tailored solutions, often designed to circumvent bankruptcy. The downside, of course, is more litigation, more polarization, and in some cases, value leakage. The art of the deal now lies in navigating this complexity with rigor and vision — balancing the imperative for speed and certainty against the risks of litigation and reputational fallout.

4. Which recent LME-related court decision do you think will have the most impact going forward?

No single case has established definitive precedent, but a trio of decisions — Serta (Fifth Circuit), Robertshaw (SDTX), and Mitel (New York Appellate) — has collectively reframed the risk calculus.

In Serta, the court rejected the “open market purchase” rationale for a non-pro rata uptier, narrowing the interpretive scope of those provisions. That decision has led to a reexamination of credit agreement drafting and could have chilling effects on aggressive exchanges where contractual ambiguity exists.

Robertshaw introduced a more nuanced outcome: while the court acknowledged a violation of the credit agreement, it declined to unwind the transaction — limiting creditors to damage claims against the estate. It’s an important reminder that, even in the face of a breach, equitable remedies may be elusive.

By contrast, Mitel upheld an uptier, with the court finding no adverse effect on non-participating lenders under the terms of the agreement. The takeaway is clear: outcomes are document-specific, jurisdiction-dependent, and increasingly hard to predict.

That said, the Trellix/Skyhigh (Magenta Buyer) deal is the quiet standout. Its high participation rate and litigation-free execution suggest that structured consensus — not brute force — is likely the future of sophisticated LME transaction. If there’s a model going forward, it’s one that combines documentary leverage with coalition-building, not just legal brinksmanship.

5. You were down on the concept of co-ops. Why was that?

From the sponsor’s perspective, there are inevitable concerns when lenders enter into a cooperation agreement — or “co-op”. Although these agreements may encourage coordination and prevent rogue creditor tactics, they have a chilling effect on a sponsor’s ability to manage the portfolio company’s capital structure during periods of financial uncertainty. This past quarter, we’ve seen sponsors push to include anti-coop language in loan documents; however, it appears that those efforts have been resisted.

The risk is that a co-op can turn previously individualized loan relationships into a unified creditor bloc. From the sponsor’s side, that can create existential challenges — it’s no longer just about the terms they negotiated in their loan docs, but about navigating a coordinated group with shared interests. That can reduce the sponsor’s flexibility to bring in new capital or pursue creative solutions in a restructuring. It also raises the risk that future capital will come with more onerous terms.

6. What changed? 

Not all co-ops are problematic. Depending on how they’re drafted, they can promote more orderly negotiations and reduce value-destructive infighting among creditors. But for investors, it’s critical to scrutinize the terms (especially for the non-co-op parties) — they can directly impact the Sponsor’s ability to act and, ultimately, the value of your investment.

7. How would the LME discussions function in an ideal world?

In a perfect world, LME discussions would start with alignment on the fundamental goal: preserving enterprise value. That requires transparency, early engagement, and a recognition that consensus is usually more durable than coercion. Unfortunately, real-world dynamics are often adversarial. Once parties retain counsel and diverge in objectives, it becomes a contest of leverage. We advise clients to prepare for both scenarios — constructive resolution where possible, but fully litigated defense if necessary.

8. You’ve been involved in numerous cross-border restructurings. How do you see these LME tactics catching on elsewhere, if at all?

They’re already being exported — but not without adaptation. In Europe, the rise of tools like the UK restructuring plans and the Dutch WHOA has allowed for LME-style outcomes in local contexts. But legal systems differ. Creditor rights, enforcement regimes, and judicial philosophies vary significantly. You can’t simply transplant a US playbook; you have to re-engineer it within the local legal architecture.

That said, the themes — using intercreditor structuring, exploiting documentation gaps, and isolating holdouts — are very much global now. What’s developing is a kind of international restructuring literacy, where tactics are tailored but the strategic mindset is shared.

9. 9fin is a UK-founded company expanding fast in the US. Any advice on merging cultures?

Since joining Linklaters in New York and being part of the firm’s transformational US growth, I’ve seen firsthand some of the best ways to merge cultures.

It’s imperative that you listen and truly understand your new market as you scale. The US market rewards speed and decisiveness, but it still values relationships and judgment. Linklaters’ expansion in the US hasn’t been focused on growth for growth’s sake — the firm has taken the time to hand pick the best talent for our firm and for our clients’ needs in the US.

Don’t lose the analytical precision and clarity that define your UK roots — adapt it to the tempo and risk appetite of the US financial ecosystem, while still embracing the global reach that sets you apart. For me, one of the biggest advantages to joining Linklaters has been the ability to tap into the firm’s top-caliber lawyers all around the world. While style varies across regions, we have a true collaborative spirit and a common goal to provide the best solutions to our clients wherever they are located. Understanding and leaning into cultural differences will help you remain authentic and unique.

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