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We’re kicking off a new podcast series, LME Doomscrolling with Laurie, where 9fin’s senior LME lawyer Laurie Tomassian unpacks the impact, risks and incentives of the evolving landscape of liability management exercises.
In this inaugural episode, Laurie sits down with Professor Mark Roe and researcher Vasile Rotaru of Harvard Law School to explore their new study which measures how non-pro rata coercive LMEs fare in the long run. They discuss whether LMEs deliver on their promise(s) to sustainably extend a distressed company’s runway.
Their study, entitled Liability Management’s Limited Runway: Corporate Restructuring Today, can be found here.
Have any questions? Send us a note at podcast@9fin.com.
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Laurie Tomassian:
I don't think I'm surprising anyone when I say LMEs attract controversy, but there's room for debate. Do they give more than they take, or do their harms outweigh their good? We are going to figure this out together. I'm your host, Laurie Tomassian. Welcome.
Let's doomscroll LMEs.
For this first episode, I am sitting with Harvard Law Professor Mark Roe and researcher
Vasile Rotaru, who have together undertaken a comprehensive study that asks how certain types of LMEs fare in the long run, and whether they deliver on their promise to sustainably extend a distressed company's runway. A link to their work is available in our show notes. Mark, Vasile, thank you for joining me. I'd like to kick off with some introductions.
Tell me a bit about your background and how you landed in this LME world.
Mark Roe:
So I've been doing bankruptcy work for a long time. And over the last few years, liability management and the course of LME have become front and center in a lot of the discussions, academic and practice. And the consequence is, start looking at them. One of the things that seemed to be in play was a sensibility that these were very positive transactions operationally. That we were going to avoid bankruptcy frequently. We're going to improve the capital structure frequently. And the firm will be better off for it.
A significant amount of the academic discussion until we got into it was along the lines of, is the course of LME a fair transaction? And we were putting that aside. It's important, but we were putting it aside. What we wanted to look at is, is this transaction one that improves the value of the company?
Laurie Tomassian:
Vasile, do you want to go ahead and share anything about yourself as well?
Vasile Rotaru:
Sure. So I'm a research fellow here at Harvard. I became aware of this trend on coercive non-pro rata LMEs, both through practice and through research. So I practiced restructuring in Europe, in Paris for a number of years before starting my academic career. And I wrote my PhD in England on financial restructurings and workouts.
So I was attentive to what was going on. It was reported by the industry media and by my former colleagues in Europe. And it seemed that there was a lack of scientific empirical research on LMEs. It was easy to see that some money is changing hands, but there seemed to be a lack of attention to the question of what is going on with a company.
Although there were some industry estimates, by Moody's and the media with examples of different transactions that went well, others that went badly. There was nothing to satisfy the curiosity of a researcher. So when I came to Harvard for the fellowship, Professor Roe suggested that this is one topic that we should look into. And that's what we did.
Laurie Tomassian:
Your paper dives into some LME history and how it's developed over the last decade. Could you walk us through some of that history?
Mark Roe:
Yeah. So the vocabulary is new. The phrase is new. Liability management exercise or liability management transactions have been only used in the last five or 10 years. And certainly the sensibility in a lot of quarters of practice and a lot of places in academia is that this is the new thing that we have to understand.
So law firms are at the cutting edge if they're doing LMEs in the restructuring space. And we have to plead guilty, too, as academics are showing that they're not just doing the old stuff. We're looking at on the ground current transactions when we study LMEs and teach them in class. All sounds true.
I practiced law a long time ago, decades ago. I did things that today would be called LMEs. Back then we call them workouts where the stressed company tries to recalibrate its debt, recalibrate its interest rate, recalibrate its maturity date so that it has a chance of surviving outside of, bankruptcy. At other times, people called them restructurings, corporate restructurings. for a short period of time, things that we now call coercive non-pro rata LMEs, had a very negative phrase. It was creditor on creditor violence.
The phrase has disappeared over the last few years, not disappeared to zero, but instead of it being the headline phrase, it's something off to the side. And I can understand why. If I just did a coercive non-pro rata LME, and there's some ambiguity that the judge has to decide upon, I don't want to go before the judge and say, "Hey, I just did some creditor on creditor violence, but, can you give me the seal of approval so that we can go ahead, go ahead with the transaction?"
Laurie Tomassian:
And so just to narrow the scope, we're talking specifically about non-pro rata coercive LMEs here. So can you just walk me through the scope of your data sample, just to have an idea of how wide the research goes?
Vasile Rotaru:
Sure. Yes. So we focus specifically on non-pro rata LMEs because they do have this structure that suggests that at least plausibly, sometimes they could go through, even if they don't create that much total value. So we looked at non-pro rata LMEs that we could find on industry-leading platforms, like 9fin and obviously the sample that we collected, which is the largest to our knowledge, 89 transactions in the past decade, might be incomplete in the sense that there could be other transactions going on in the market. But we have no reason to think that our results would be in any way different for a simple reason that platforms like 9fin start reporting on these transactions in real time, meaning that neither you, nor others in the market know what will happen in two or three years. So when you, when you start reporting, it's just a transaction and we pick that up for this reporting.
So we have 89 non-pro rata LMEs in the past decade. And I think that's, that's the answer to your question on the sample.
Laurie Tomassian:
Yeah. And I think Mark, you touched on this a bit earlier. So these types of LMEs are advertised as having a number of virtues. Before we dive into the data, what do they promise to do?
Mark Roe:
The best case or the positive version of the LME, particularly of the coercive non-pro rata LME is we're going to avoid bankruptcy. We're not going to avoid it all the time, but we're going to avoid a lot of bankruptcies and bankruptcies are expensive or just things we'd like to avoid. We're going to stabilize the capital structure, presumably by deleveraging. We're going to improve the credit quality of the firm. And, the phrase that people like to use is extend the runway. Presumably we're extending the runway so that some of these are, many of the coercive LMEs will take off. And that's the promise.
And we, there are certainly anecdotally examples of the promise being delivered on. And there are examples from the basic financial media, from the Financial Times and from Wall Street Journal and 9fin of them not meeting their promise. So our goal was to assess on average, are the coercive LMEs hitting the numbers and doing what's promised?
Laurie Tomassian:
And how did they fare in practice across those metrics as you've identified? Maybe we can start with bankruptcy and default in a post LME context.
Vasile Rotaru:
Sure. So other than bankruptcy and re-default rates, which are, which are high, I have the figures here within three years of an LME, it's the average is 70% go into bankruptcy. And if you look at cohorts of LMEs that have more than two years of history, it's basically 60% that either defaulted again or went into bankruptcy.
Laurie Tomassian:
Following those rates. So it looks like 93% of these LMEs either default or file for bankruptcy anyway, when you measure in a post three year period. How do these rates compare in the context of a bankruptcy and specifically a prepack bankruptcy? Because I think your research focuses on prepacks as they're structurally a little more similar to LMEs as requiring a certain threshold of lender consent to proceed? Just to have a sense of comparison. Right?
Vasile Rotaru:
So, so first of all, we should say that the deeper you look in time at the LMEs in our sample, obviously the sample gets smaller. So they if you talk about the bankruptcy rates of companies that had an LME more than three years ago, it's more than 70% of those companies that, that filed for bankruptcy. But we also see that the bankruptcies are quite quick, which means that within two years of an LME, only 20% avoid either defaulting or going into bankruptcy. So these rates are quite high. Now, if you try to see a comparison, obviously we cannot get a very clean comparison because the companies are private and we don't have the kind of financial data that would allow us to run the tests that would be, that would be required, but it makes sense to look at prepacks.
And the reason is that typically the support from creditors that a non-pro rata LME requires is quite similar to what would be required to go through with a prepackaged or a prearranged bankruptcy. So we looked at a set of prepacks and prearranged bankruptcies, and we find that within two years of a, of a prepack, only 3.6% go into bankruptcy again. And within three years, it's under 6%, which compares quite favorably with, with the rates that we find for non-pro rata LMEs. And now the other question is, what about the pro rata type of out of court restructurings? And we don't have a complete set of those, but from what we have from other researchers looking at distressed exchanges in the broadly syndicated loan market and high-yield notes market, we know that the bankruptcy rates within five years for those transactions, most of which are pro rata, is closer to 20%.
So again, putting this together with what we find for non-pro rata LMEs, the results seem quite sobering.
Laurie Tomassian:
Okay. And, how about in terms of the other metrics outside of bankruptcy and default?
Vasile Rotaru:
So, one of the metrics that is important in our perspective is whether the LME actually achieves any meaningful deleveraging. And the reason is it's easy to understand that many companies have too much debt. So they have a debt overhang problem, which could constrain their investment opportunities, new funding opportunities, and so forth. And cash is diverted from operations to paying interest rates and so forth.
So when we look on average at non-pro rata LMEs, we find that the deleveraging is really non-existent. Actually on average, debt levels increase slightly. So to be clear, there is some new funding, new money obtained by the company. So it's in the order of 10% on average. There is some discount captured on the market through exchanges into lower face value debt. But on average, putting these things together, we find that there is no meaningful deleveraging. And actually there is a little bit of an increase in debt.
And very importantly, in our view, generally on average, the resulting capital structure is more complicated. Meaning it has more priority layers, which could potentially lead to either more contentious bankruptcies when they come, or simply constrain the firm more. So to be clear, again, some LMEs achieve better results for companies, others achieve worse results. But on average it doesn't look like they're achieving much of a deleveraging.
Laurie Tomassian:
What about costs of bankruptcy? This is also touted as a virtue of LMEs and that they save costs. They're quick. You found that these claims are overstated though. Can you speak to that and what you found in your data?
Mark Roe:
I could say a couple of things. One is, it may be true. We can only get at this question indirectly. But the indirection suggests that it's plausibly exaggerated that there are big cost savings going on. One is the most basic, and this we have confidence in, is since most of the firms end up going bankrupt in three years anyway, we're not saving costs in bankruptcy. We're doing the costs of the LME and then we're doing the costs of a bankruptcy in a couple of years anyway.
Maybe the bankruptcy is simpler because of the LME. But a fair amount of what we're seeing is we don't see where the simpler is going to come from in that there's no significant deleveraging. Credit rating is about the same. So it's not obvious that it would be simpler. That's the main and simple aspect to it.
We did some crude comparisons, which we're not going to say proves the case, but they're suggestive. The time in an LME is about the time in a bankruptcy. And if the time is roughly similar, that's an indicator that costs could likely be similar. Probably there's more lawyer work and professional work in the bankruptcy, but things are in the same range.
Laurie Tomassian:
And the ratings outcome also fails, according to your data, to point to significant improvement post LME, right?
Mark Roe:
Yes. What we find on the ratings front is most of the firms going into the LME are in the CCC range, so it's not particularly good. And most of the firms coming out of the LME the first time the S&P rates them are CCC. So we're not getting a ratings improvement with the LME. And the other aspect is a handful of firms do come out of the LME rated in the B range. Most of them were rated in the B range when they went in. So we're not really seeing a ratings improvement.
And it makes sense is that the rating agencies, if they have the instinct that our data points to, most of the firms are going to end up in Chapter 11 in a couple of years anyway. So a sound rating agency shouldn't be rating the firm's investment grade when the probability is they're going to be in Chapter 11 in a few years.
Laurie Tomassian:
So given all you've found, because you've identified that there are some shortcomings to LMEs and there are some inefficiencies. Why do you think that LMEs or these types of non-pro rata coercive LMEs have become such an important tool? Who stands to gain from these transactions?
Vasile Rotaru:
Well, first of all, we should recognize that this phenomenon comes against a specific background, which is a long period of historically low interest rates following the financial crisis. Which means that creditors are competing for deals and naturally the protections that they get deteriorated. And at the same time, an unrelated but important systemic move in the American financial system towards what we call in the paper, a strong owners and weaker creditors phenomenon, which means, strong, concentrated private equity sponsors facing very often dispersed creditors who are weaker than what they had to face before, banks and or what we'll probably face in the future, like private credit. So this background is set.
Now, why do people go through with LMEs? Now, it could be that in expectation, many of these deals looks look like they are creating value for the company. It's tough to rule this out on the data that is available, although our aggregate data suggests post-factum it doesn't look that way. But it could very well be that people are optimistic. They think that delaying bankruptcy could actually give sufficient runway for a company to turn around, the economy to turn around, some good projects to pay off and so forth. But it could also be that the structure of LME or the non-pro rata LME creates opportunities for private gains, even if they don't, even if the transaction doesn't increase total company value. So again, we cannot know that for sure in any specific case, what we say is that there is this possibility which should at least raise doubt.
So what are you talking about? Well, the first and most obvious one is gaining option value for shareholders. So if the company goes into a prepack, it could be that the private equity owner will end up owning the company after a prepack if all the creditors agree. But in most cases they won't. Delaying bankruptcy means the option value embedded in the equity is extended and that's a win for shareholders. It could also be that the extended runway leaves opportunities in order to continue paying management fees and maybe move some assets around and so forth. So, it leaves equity in control and it leaves equity with the possibility of getting more value out of the investment. So it's rational for private equity sponsors in many circumstances to go through with a transaction, even if it doesn't particularly benefit the company.
The second, from the perspective of creditors, it's important to note that again, the structure of an non-pro rata LME is such that it could be very good business for creditors in the winning coalition, so to, and very bad business for those who are left behind. So naturally creditors will compete for being in the winning coalition and for not being left behind. So even if the value of a company doesn't increase much or not at all, it could be that the value transfer from the left behind is enough to justify the transaction. And the threat of being left behind is enough to induce, to induce agreement.
And it could also be that some creditors are, like the CLOs might, might have incentives to also delay hard defaults that would push a mark to market of, of the underlying loans and would stop interest payments and so forth. So there's a way in which, non-pro rata LMEs, even if they are not good for the company, which might be the case in some instances, are very rational for those who get to make the decision of going through. So it's not surprising in a way that market participants go through with transactions, even if we find that after all, they don't look that good.
Laurie Tomassian:
On the topic of creditor incentives, you suggest that the larger creditors have less to fear in the context of an LME because they have a larger position that can either enhance their negotiating position, or they can be in a blocking position with respect to any deals offered. Do you think over time that this could encourage more concentrated creditor players and maybe reduce competition or diversification in the distressed market?
Mark Roe:
That is a risk. It's hard to tell whether it's a big risk or just a small add-on feature, but in some ways to just repeat what's embedded in the question, if to pick a random company, if Carlyle has 51% of the relevant issue, they can't be on the losing end of an LME for that layer because somehow 51% has to approve. And probably they can't be on the losing end if they have some noticeable amount less than 51%. So that raises the costs of small players, but doesn't raise the cost of the big players.
The consequence is, it could push some of the small players to decide we have to be bigger players, or we will only participate upfront in some of the credits where we think there's a good chance that there's going to be a coercive LME. We won't participate unless we get a blocking position. And the push would be to either have larger blocks of debt or larger creditor companies that can place and take the larger positions.
And so it's a potential negative impact of the structure of the LMEs. Very hard to figure out whether it's just a slight push in that direction or whether it's a big push in that direction.
Laurie Tomassian: And you also have creditor co-ops, right? That might shift incentives for maybe a more consensual deal to be struck?
Vasile Rotaru:
Well, we don't deal that much with cooperation agreements in the paper, other than noticing that their spread does suggest that markets react to non-pro rata LMEs and to the risk of non-pro rata LMEs. Now, all co-ops are obviously not made equal. Some of them are very inclusive and embed the pro rata treatment for the members. Others are themselves discriminatory. And it's tough to judge what their impact is in the abstract.
But it is noticeable that the spread of co-ops, both in the U.S. and in Europe, is one of the market reactions to what is perceived as being incomplete or loose documentation. There is one way in which you protect yourself is by binding together upfront. So we see that this is a market reaction and not something that we're surprised about, given our results.
Laurie Tomassian:
And in terms of just the way this plays out in the market and the debt documents, with all of these inefficiencies and the lopsided incentives that you flagged in your data, I guess we should expect parties to negotiate contracts better upfront so that these loopholes for a potential LME are closed at the outset. But you found that changes in deal terms are slow to evolve for a few reasons. Why is that?
Mark Roe:
One is upfront, while in the LME space, this is really big, and this is what we talk about, and this is what we analyze. In the whole credit market, the LMEs, in particular the non-pro rata LMEs are a small part of the overall debt market. Consequence is, upfront when the deal is being done, the people providing the credit, even if they're really thinking about, I don't want to be on the wrong end of a coercive non-pro rata LME, will think the odds of that happening are, I'm just picking a number now, one out of a hundred. And I really want to be in this deal. I think the rate is good enough to absorb the one in a hundred risk of being on the wrong end. And if I start raising problems, since credit markets are not particularly tight, if I start raising problems, there's a good chance I'll be invited not to participate in the deal. So that's one reason.
There's a structural reason in terms of some lending. The practice is developed where the debtor names the law firm for the creditors, and it's a responsible law firm. But it's not a structure that's likely to push every time where the creditors' lawyers say, hey, we want to introduce this other term to protect. This is one where we'll do what we've usually been doing, and it works.
Third thing that we just put on, we noticed, despite all this, despite all these things that are frictions against blocking terms appearing, blocking terms are appearing. They're not appearing in every loan, but they're appearing in a significant number of credits. And one thing we noticed that we came across is, after an LME, after a non-propro rata LME, the winning coalition that got the non-pro rata LME where they benefit and others lose, seemed to be insisting on extremely strong blocking terms in their credit instrument so that what they have just successfully done in the current transaction can't be done to them in a future transaction.
So what it looks like is that there are trends, but there's not an overwhelming 180-degree shift where people say, ah, non-propro rata LME, we don't like it, and so let's block it. It looks like these transactions, the terms, the blockers are added by accretion. They're added strongly in a subset of the market. There are, as you brought up, other transactional reactions like co-op agreements among the creditors. So there's movement against. It's not movement that is saying, stop them right now.Laurie Tomassian: As someone who spends a lot of time in the world of blockers, I can also add that one loophole closed means that the next transaction, there will probably be a new loophole opened, and it's constantly a moving target. So I could see how that also adds to the tension of changing things.
Mark Roe:
Related to that, one thing that is true about all changes in standard, semi-standard form agreements, which is similar to what you just said. Lawyers on deals are reluctant to make a significant change on page 47, clause 1D of the loan agreement, because it could have an impact on clause 7F on page 89. And if they have all the time in the world, they'll work it through. But if it's not really important to the deal up front, a lot of lawyers will say, let's just do the deal the way we did it last time. There are risks if we start playing around with the contract.
Laurie Tomassian:
Yeah, that makes a lot of sense. I want to switch gears a little bit and talk about the future of LMEs. So are there any ways to recalibrate to make them more effective in your view? Any counter movements that can alleviate some of the issues that you've identified
Mark Roe:
Well, transactionally, I guess there are a few. One is it could turn out that if the market ends up concluding that these are not operationally useful transactions, the mild, moderate trend to blockers could accelerate and become a more significant trend. So that's one possible movement in the future. At least in principle, since we haven't looked closely at pro rata LMEs directly ourselves, as opposed to relying on what others have done, a cure for the problems of non-pro rata LMEs is more pro rata LMEs, and which may involve, still involve some coercion, but won't involve as much coercion.
One thing that I'd add is an additional thing might be what the judges do. So a certain amount of what works and doesn't work in terms of coercive, non-pro rata LMEs is how the judges interpret the contract. And we've got mixed results where some judges are interpreting a possibly ambiguous contract and said, can't do the LME. And other judges have said with a plausibly ambiguous contract, there's no blocker in there. So what the judges do.
And there is at least some possibility that this research could influence some of the back of the mind aspects of what the judges are thinking, in that, to the extent the judge has been thinking things similar to the prevailing wisdom, or what we would say is the prevailing wisdom before we did this research, that we're beating bankruptcy a good portion of the time, we're improving the company. If the judge is thinking this is probably a positive transaction, there's some chance that going in thinking it's probably a positive transaction will lead more likely to, let's let the coercive LME go through, net, it's a benefit. If the judge absorbs and agrees with this research in the back of his or her mind, that these are not positive transactions, they are neutral or maybe even sometimes negative transactions, the judge is maybe going to be less sympathetic to the interpretation of an ambiguous contract of let it go through.
The last thing that I'd add, a lot of what we end up doing, of what we end up seeing in these kinds of markets, depends on things that are happening outside of the contract and outside of the judicial decision. So, Vasile mentioned before, because of low interest rates since the financial crisis, debt went on sale and so also debt covenants went on sale and the debtor has the upper hand in a great deal of the credit contracts. If things happen outside of the contracting sphere and the contract interpretation sphere, the judiciary, there are things that happen outside the background structures noise that could have a deep impact on what we end up doing and end up seeing three, five years from now in coercive LMEs. So, right now we've got strong private equity. We've got banks taking a backseat in a lot of these transactions. If things change so that banks aren't taking a backseat anymore, and if things change where the interest rates rise and debtors find it harder to raise money and have to pay more interest and have to give better covenants for the creditor, we could see these things just disappearing, see the potential for a non-coercive LME just disappearing because of the outside pressures from the credit market
Laurie Tomassian:
So, coercive LMEs with all their flaws are around, for better or for worse, at least for now. What's at stake if they continue to dominate the market the way they have?
Vasile Rotaru:
Well, I would push back against the idea that they actually dominate the market, even amongst out-of-court restructurings, non-pro rata LMEs remain a substantial, but a minority out of all the transactions. But I get the point that they seem to be on an upward trend that doesn't seem to be significantly slowing down. Now, again, it's difficult to know in any particular case if more value is created or not based on the data that we can gather.
But we think that what we present as the typical outcome of an LME and the embedded possibilities for private gain, even if it doesn't create collective value, the company value, means that to some extent there could be some waste in the market in the following sense. So, first of all, overinvestment, meaning that capital might be captured, stuck in businesses that do not produce equivalent value to what that capital could produce outside of that business in other investments. Companies could go longer with debt overhang problems and other constraints on their ability to create value, even though they are fundamentally good businesses with bad capital structures. It could take longer for those capital structures to be fixed than for the potential for growth of the companies to be liberated.
And there's also, in some ways, something that is good for the industry, for advisors, maybe even academics, which is there's a lot of jockeying around for priority, a lot of negotiations going on. If you take a step back and you think about it, it's not necessarily, if the end result doesn't fix the company, it's not necessarily a socially valuable investment. So, there is a potential for some waste from a social welfare perspective.
Now, we should put this into the right context. And as Professor Roe mentioned, non-pro rata LMEs are a small segment of what's going on in the debt markets overall in the United States. So, although we might think that there is a lot of waste or wasted opportunity to do better restructurings quicker, this is only one small part of the market. So, it could be that the overall cost for the economy is not that great, although it potentially exists.
Laurie Tomassian:
And you make an interesting argument towards the end of your piece that I think is less talked about. So, you suggest that directors could risk breaching their fiduciary duties by pursuing an LME at all costs, even when they know that it might not be in the best operational interests of the company. Should we be talking about this more?
Mark Roe:
Not much more. There's an issue. The barriers to a successful fiduciary duty suit are so many and likely to stay in place that directors and officers should not be quaking, oh my God, we've got a potential risk. But there's something to put on the table. So, one thing that's grown around in the LME space, which is accurate, is that the Delaware fiduciary rules have come down after some back and forth over the decades that there's no fiduciary duty running from the company to creditors.
You'll remember there was this period of time where there were doctrines floating around of fiduciary duty, when the company is in the vicinity of bankruptcy. That's gone. There's no fiduciary duty to creditors in the vicinity of bankruptcy or otherwise. What there is, is there's a fiduciary duty to the company to manage the operations well. And that's where we thought, footnote is too belittling, but additional bullet point on the list of six or seven bullet points maybe is where we want to be. In that, once we start talking about fiduciary duty to the company, there are still multiple barriers before any officer or director will be at risk. A good faith determination that we think we can beat bankruptcy or the chance that we can beat bankruptcy is a valuable one, is going to be good enough to the corporate law courts.
Even if there's a conflict of interest on the part of the relevant director, if the decision is made by independent directors, that'll insulate everybody from fiduciary duty suit. And then there's another set of barriers. The stockholders have no interest in bringing this claim.
The creditors could have an interest in bringing this claim. If you didn't do this, there would be more money for the creditors. But the creditors have to show to get standing. They have to show that the company is insolvent, sometimes easy, sometimes ambiguous or uncertain whether their company is really solvent. And then if they win, the money goes to the company. It doesn't go directly to them. So all those are barriers now and have been barriers for a long time.
The thing that we add is the prevailing sales idea for the non-pro rata LME that we're going to make gains by beating bankruptcy, by improving the capital structure, by making the company more stable, don't seem on average to be true. And if they're not on average to be true, if somehow somebody got past these four or five other barriers that we mentioned, the issue could be in play. But to get past those other barriers are, each one will knock out a very high portion of any potential fiduciary duty claims. If the members of the board said, I don't think this is good for the company, but it increases our option value, that starts to raise more of a fiduciary duty problem than "We're going to beat bankruptcy because we'll do the LME and we have a 65% chance of beating bankruptcy."
Laurie Tomassian:
Okay, and I have a final question and this is forward-looking. Any predictions for 2026 in terms of how LMEs will evolve or any innovation in the space?
Mark Roe:
We have enough trouble looking in the past to see what actually happened in 2020 to 2025 to figure out.
Laurie Tomassian:
Fair enough. Okay.
Mark Roe: Well, here's an anodyne projection. People will be talking about coercive non-pro rata LMEs all through 2026.
Laurie Tomassian:
I think that's a safe bet. Okay, well, thank you both very much for joining me today. I really appreciate your time.
Mark Roe:
Thank you.
Vasile Rotaru:
Thanks, Laurie.
Laurie Tomassian:
I'd also like to thank our listeners. If you have any questions, musings, or anything to say at all, really, you can reach us at podcast at 9fin.com.