Davis Polk Restructuring co-head Damian Schaible discussed the evolution of liability management transactions over the past several years and how the business of restructuring has changed over the course of his career with Petition.

In the Q&A, Damian explained the progression of liability management deals from LME 1.0 or deals where minority shareholders were left behind, to sponsor-driven LME 2.0 deals that are aimed at incentivizing all lenders to participate.

He added that the market has now been shifting toward LME 3.0. “These deals are principally focused on maturity extension – many seeking extension of capital structures (and therefore equity option value) out past the 2028 maturity wall. New money is part of these deals when liquidity might be needed to actually realize the benefit of the extended stated maturities, but discount is much less of a focus. Because these deals are principally focused on maturity extension, they tend toward being more pro rata (putting aside backstop and other fees that may be allocated to the larger lenders doing most of the work). And since the sponsors want to realize value for tightening their loose documents and the loose documents are a wasting asset, these transactions often get teed up more than two years before maturity. We’ve done a bunch of 3.0 deals recently,” Damian said.

Damian also noted that the rise of the private credit market will likely result in more distressed deals. “The private credit market has obviously exploded in size over the past few years. More participants have more money to put to work each year, leading to an enormous market shift. The old days of the sleepy private credit landscape of tightly documented middle-market deals with one to three lenders has been supplemented with a new creature that is ably challenging the BSL market for some of the biggest deals. With that competition and convergence comes bigger deals, bigger syndicates (including new and different participants) and looser and looser documents. It only stands to reason that there will be more distressed deals to be addressed and more BSL-like attributes – like, someday, LMEs…”

When asked about the biggest changes he has witnessed in the restructuring space over the course of his career, Damian said, “Our profession has changed so much and so rapidly in the past dozen or so years. I used to say that if you were out of the business for six months, you’d be lost. Now I sometimes feel that way after a long weekend.”

“Notice of Appearance: Damian Schaible,” Petition (November 5, 2025)

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