Jason McDonell, the chief executive of pool supply retailer Leslie’s, framed the hiring of Kirkland & Ellis as business as usual.
Executives at the 63-year-old business were “energized” by efforts to transform the company, he said on an earnings call in December last year. Advisors, he said, are periodically tapped to identify new opportunities for profit.
Behind the scenes, the same advisors began weighing a possible liability management exercise, according to public disclosures and a person familiar with the matter — a potential out-of-court restructuring offering some lenders sweeteners in exchange for relaxed loan requirements, often at the expense of creditors who do not participate.
By August, McDonell’s tone had changed. Leslie’s executives issued a going concern notice and declined to answer analyst questions at their quarterly earnings call, sending the company’s share price tumbling 42% to less than a dollar. As out-of-court options dwindled, Leslie’s advisors began laying the groundwork for a possible Chapter 11 filing.
Liability management exercises have over the last decade shifted from a novel tool to an essential weapon in restructuring lawyers’ arsenals. But the technique once defined by explosive growth is falling in volume. The dollar amount of liability management...
