Bankruptcy Pros Adapt Private Equity-Backed Restructuring Moves

A growing wave of financial tinkering by distressed companies to raise new money is leaving a lasting mark on corporate restructuring practices as lawyers engineer and navigate evolving forms of liability management transactions.

The controversial maneuvers, sometimes pitting creditors against one another in a battle for collateral and repayment priority, have become commonplace in the leveraged finance market since the Covid-19 pandemic. Companies hoping to stave off bankruptcy—mostly those with private equity backers—arrange lofty and often aggressive out-of-court restructuring deals to raise fresh cash by exploiting loose language in their existing loan agreements.

A proliferation of these transactions, exemplified last ...