Lawyers
Hybrid Capital & Special Situations Group Head Sung Pak spoke with Octus, a news and analytics company focused on sub-investment-grade credit, about a potential new approach to restructurings that falls between traditional liability management exercises (LMEs) and in-court bankruptcy processes. In “Paul Weiss’ Sung Pak Sees ‘Third Way’ for Restructurings, Plus Octus Rounds Up 2025 and Looks to the Year Ahead,” published on January 9 as part of Octus’s Americas Special Sits and Distressed Weekly newsletter, Sung notes that although traditional LMEs avoid an in-court process, there is a limit to deleveraging, which often results in lenders closing down options for organic growth. As a solution, Sung highlights a recent “third way” approach that a Paul, Weiss team took, where a distressed company was given two years to achieve significant pay-down and equity raise before investors took ownership, creating a path for the sponsor to make the extension permanent or refinance entirely.
“We effectively made every single obligor bankruptcy remote by installing independent directors with modified fiduciary duties as to bankruptcy, similar to structured finance,” Sung says. “We think this was a real third-way-type transaction that was made palatable to the sponsor by giving it opportunity and time, while also giving debt investors the ability to deleverage and obtain control without process costs, if the business requires real deleveraging down the line.”
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