Anastasia Beverly Hills completed its out-of-court recapitalization with an ad hoc group of first lien term loan lenders that satisfied all stakeholders and kept the company’s capital structure simple. Such an outcome is remarkable for those involved, considering the company dropped down IP assets in April 2025 as an apparent act of aggression to negotiate a restructuring with its lenders and later blew through its August 2025 maturity on more than $600m of term loan debt.

The recapitalization also marks a departure from previous iterations of LMEs that heavily favored majority lenders, created multi-layered capital structures, or simply delayed an equity wipeout in bankruptcy.

The key to an amicable resolution is usually cash, and in this case it came from the cosmetics company’s eponymous founder Anastasia Soare who contributed $225m of new money in exchange for 55% of the reorganized equity. It was substantial contribution from the individual investor—a larger equity check to buy back her own company out of distress than most sponsors are willing to write—that reflected her confidence in the underlying business and resolve to stay in control, according to a source.

The lenders received part of Anastasia’s contribution as a cash paydown and exchanged their remaining holdings into a $250m takeback first lien term loan due 2030 with lower mandatory amortization and 39% of the reorganized equity, according to sources.

The lenders also retained $22m of accrued PIK interest from the previous term loan. All told, the lenders emerged with par-equivalent value, tightened credit documents, and two board seats as part of the fully pro-rata transaction that received 100% participation. Meanwhile, sponsor TPG saw its equity stake reduced from 38% to 6%.

With the resulting takeback debt and accrued PIK interest, the company now sits at between 4-5x leverage based on its latest EBITDA of $57m, a significant improvement in its leverage profile and debt service coverage. The company also received much-needed liquidity from Anastasia’s contribution.

That puzzling and provocative drop-down in April 2025, where the company assigned its brand IP rights to two newly created unrestricted subsidiaries ahead of an impending August 2025 maturity, proved superfluous to the deal that was struck and was essentially unwound, according to sources.

At the time, maturity was less than three months away and the lenders would have accepted only a par paydown, eliminating the possibility of any discount capture that could have resulted from raising new secured debt at the UnSubs. Even with discount capture, the company would have likely needed a substantial injection of fresh capital to avoid bankruptcy. Additionally, any attempt at a MyTheresa-style upstream equity dividend would have created serious fraudulent conveyance risks for the company. In MyTheresa, subsidiaries holding valuable assets were designated as unrestricted and their equity was later sent upstream to a sponsor-owned HoldCo through a dividend, bypassing an equity pledge for the benefit of the company’s lenders.

LME 3.0?

In a recent 9fin webinar on current and future trends in LMEs, several speakers predicted that LMEs would increasingly resemble full out-of-court recapitalizations, with the goal of providing companies with substantial and meaningful liquidity and deleveraging to avoid bankruptcy altogether.

The company’s transaction is an example of that shift. In contrast with LME 1.0 transactions, where majority participating creditors used aggressive maneuvers to execute non-pro-rata deals that left behind minority non-participating lenders, the company’s transaction was fully pro-rata and received universal participation from lenders. And unlike LME 2.0 transactions, where lenders took varying levels of discount and ended up in dizzying post-LME capital structures with multiple layers, the company’s transaction involved no discount capture and kept the capital structure relatively straightforward.

Most importantly, the transaction injected crucial liquidity into the business and also achieved considerable deleveraging through equitization.

While it remains to be seen whether the company’s carefully sculpted transaction represents a new frontier in LMEs, what is clear is that sponsors and lenders will continue to iterate and adapt as they seek to create and capture value in distressed situations.

Anastasia Beverly Hills was advised by Ropes & Grey and Lazard. The ad hoc group was advised by Milbank and Houlihan Lokey. TPG was advised by Davis Polk.

Representatives at Anastasia Beverly Hills, Ropes, Lazard, Milbank, Houlihan, TPG, and Davis Polk did not immediately respond to requests for comment.