European Capital Markets

By John Houghton and David Stewart

Liability management exercises (LMEs) are increasing in the bond and capital market and are often used in relatively benign situations. They are certainly not always a precursor to a full-scale restructuring or insolvency.

The increasing sophistication and flexibility of the European market means that companies have a number of options when looking to restructure their debt. In 2015, the Ukrainian energy business DTEK, advised by the Latham & Watkins restructuring team, restructured its high yield bonds through an advanced parallel-track exchange offer, consent solicitation and an English scheme of arrangement. It presented a pioneering instance of a liability management exercise being run in parallel with a scheme of arrangement. It also illustrated the English courts’ willingness to accept jurisdiction not only on the basis of the governing law of the bonds being English, for which there are ample precedents, but where that governing law had been purposively changed from New York to English law by way of consent solicitation.