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Liability-Management Exercises: Sustainable Solutions, or Temporary Fixes?

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James Newton, a partner in Morrison Foerster’s Business Restructuring + Insolvency Group, will present for American Bankruptcy...

James Newton, a partner in Morrison Foerster’s Business Restructuring + Insolvency Group, will present for American Bankruptcy Institute VALCON 2025 at the Four Seasons Hotel in Las Vegas, Nevada. James will speak on the following panel: “Liability-Management Exercises: Sustainable Solutions, or Temporary Fixes?” on Thursday, May 15, 2025, at 2:15 – 3:15 p.m. PT. Despite the potential need to reassess liability management exercise (LME) structuring following the Fifth Circuit’s Serta decision, LMEs will continue to proliferate. Questions remain, though: Should we view LMEs as nothing more than free options for sponsors and a rearranging of deck chairs on a sinking ship? Or can they be a force for good, leading to improved enterprise value and corresponding improved returns to all creditors? If so, how can companies maximize the chances of their LME doing so? This panel will address these questions and more.<hr>

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James Newton is a partner in the Business Restructuring + Insolvency Group, based in the New York office. He focuses on advising individual and ad hoc groups of financial creditors in connection with distressed debt investments, distressed M&A transactions, and other special situations and restructuring matters.James routinely advises financial institutions, alternative investment advisors, and other clients in connection with in- and out-of-court workouts and restructuring matters involving existing stressed and distressed investments. He is also regularly called upon by clients seeking to develop and implement creatively structured and bespoke financing or asset purchase transactions, including in connection with stressed and distressed refinancings and capital raising transactions, exchange offers, swap and hedging transactions, structured finance transactions, and receivables financing transactions undertaken in the bankruptcy and restructuring contexts.While James’s practice focuses on advising bondholders and lenders, he also has significant experience representing debtors, creditors’ committees, individual creditors, and purchasers of assets in bankruptcy cases.James received his J.D. and M.B.A. from Temple University, his LL.M. in bankruptcy law from St. John’s University, and a B.S.B.A. in finance from the University of Florida.<h4>Liability Management and Other Out-of-Court Workout, Financing, and Distressed M&A Matters</h4><ul><li>Ad Hoc Group of KLDiscovery Convertible Noteholders Advised an ad hoc group of convertible debenture holders through an out-of-court restructuring, resulting in an exchange of approximately $266 million (100%) of KLDiscovery Inc.’s issued and outstanding debentures for approximately 96% of the company’s common equity.</li><li>Diversified Healthcare Trust Refinancing Transaction Represented initial purchasers in a $941 million Rule 144A offering of zero coupon senior secured notes of Diversified Healthcare Trust (Nasdaq: DHC).</li><li>Puerto Rico Infrastructure Financing Authority Represented alternative asset managers in connection with an out-of-court workout of “double-dip” bonds issued by the Puerto Rico Infrastructure Financing Authority and guaranteed by the Commonwealth of Puerto Rico.</li><li>Ad Hoc Group of Puerto Rico Ports Authority Bondholders Represented two separate ad hoc groups of Puerto Rico Ports Authority bondholders in connection with restructuring over $190 million in funded debt obligations owed by the Puerto Rico Ports Authority. The initial restructuring transaction became one of the first successful restructuring efforts under the newly enacted Puerto Rico Oversight, Management, and Economic Stability Act.</li><li>Ad Hoc Group of Education Management Corporation Lenders Represented an ad hoc group of term and revolving lenders to Education Management Corporation in connection with negotiation and implementation of a strict foreclosure on their collateral and subsequent efforts to monetize that collateral.</li><li>Ad Hoc Group of Dream Center Education Holdings Term Lenders Represented an ad hoc group of term lenders to Dream Center Education Holdings in connection with Dream Center’s distressed spinoff of two not-for-profit education systems to new ownership and the simultaneous restructuring of existing debt facilities.</li><li>PREPA Administrative Expense Financing Advised leading alternative asset manager in connection with a bespoke transaction involving the purchase of the “first dollars” recovered on account of a $390 million administrative expense claim asserted by Cobra Acquisitions LLC against the Puerto Rico Electric Power Authority (PREPA).</li><li>Aircraft Financing Workout Led efforts to acquire and work out a loan secured by multiple aircraft and engines operated by a U.S. airline. </li></ul><h4>In-Court Restructuring Matters</h4><ul><li>In re Synthego Corporation Representing sole prepetition secured lender, debtor-in-possession lender, and stalking horse bidder in the chapter 11 case of Synthego Corporation.</li><li>In re Village Roadshow Entertainment Group Advising holders of senior secured notes in connection with chapter 11 cases by Village Roadshow Entertainmnet Group (BVI) Limited and its affiliated debtors, including in connection with structuring and implementation of bespoke debtor-in-posession financing to bridge to a sale of the debtors’ film library.</li><li>In re Silvergate Capital Corp. Representing global institutional alternative asset management firm in connection with multiple claims in the chapter 11 cases of Silvergate Capital Corp. and its affiliated Debtors, including in connection with its holdings of over 95% of the debtors’ Junior Subordinated Notes due 2031.</li><li>In re JER Investors Trust Inc. Advised global institutional alternative asset management firm in connection with bankruptcy of JER Investors Trust Inc., a real estate investment trust that managed a portfolio of commercial real estate mortgage and other assets, in connection with the restructuring of the company’s Junior Subordinated Notes, including challenges to REIT management agreement termination fee.</li><li>Ad Hoc Group of Constitutional Debtholders Represented an ad hoc group of holders of bonds issued by the Commonwealth of Puerto Rico and certain of its instrumentalities in connection with Puerto Rico’s efforts to improve its fiscal situation and, ultimately, in connection with the restructuring of their debt under the Puerto Rico Oversight, Management, and Economic Stability Act and related Commonwealth laws.</li><li>Ad Hoc Group of PBA Funds Represented an ad hoc group of holders of bonds issued by the Puerto Rico Public Buildings Authority (PBA) advancing “double-dip” claims against the PBA and the Commonwealth of Puerto Rico, including pursuit of litigation seeking administrative expense claims for lease rental payments owed to the PBA. The PBA Funds’ efforts led to a significant increase in the price of PBA bonds and established an administrative expense claim that ultimately served as the centerpiece of a plan of adjustment for both the PBA and the Commonwealth of Puerto Rico.</li></ul>

James Newton

Partner

Business Restructuring + Insolvency

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Liability-Management Exercises: Sustainable Solutions, or Temporary Fixes?

15 May 2025 2:15 PM - 3:15 PM PDT