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Whatever your feelings on LMEs, there is no denying they are here to stay. In the UK, following the recent ruling in Petrofac and that in Waldorf Production, we are likely to see more companies veer away from formal restructuring plans given the new level of uncertainty. Such a change is likely to lead to a rise in consensual out-of-court restructurings, including LMEs.

As Duane Loft, partner at Pallas Partners, observes, such a movement seemed inevitable anyway “given the presence of US sponsors and US advisors in the European capital markets”.

This is the third and final part of our series on the Americanisation of European LMEs. Part 1 looked at the origins of LMEs in Europe and part 2 took a deep dive into some of the European cases to have tapped into the more aggressive style transactions. This last instalment looks to the future of LMEs and considers where the market goes from here.

Fair judgment

As set out in Part 1, the pattern of movement in the US — at least in the first half of 2025 — is towards more pro rata, inclusive transactions that are more akin to amend and extends than anything else. Such structures are, as one 9fin source suggests, slightly more innovative than a simple A&E, but the sole purpose still appears to be an extension of the company’s runway.

Everything about European LMEs to date suggests they follow the pace set in the US, so the simple assumption is European deals will eventually align with this approach. That would make the current spike in aggressive transactions only a temporary phase.

“It’s almost like [European] sponsors and their advisors were asleep during [the US trend] and have gone back to the much harsher forms of less inclusive LMEs,” says Loft, adding that he “expects that trend to take hold in Europe” with the “European market [evolving] to more inclusive deals”.

This is not what we have been seeing in the out-of-court restructurings in Europe, as discussed in Part 2, but is in line with what we are seeing in court, especially in the UK. In both Petrofac and Waldorf, the court refused to sanction the plan on the grounds of fairness. In both cases, the plan company failed to treat the out-of-the-money creditors fairly when considering the application of the restructuring surplus (i.e. the benefits of the restructuring).