Impending debt maturities, distressed debt trading levels and difficult economic conditions, coupled with the lack of liquidity in the financial markets, have caused many US companies to think creatively about restructuring their commercial loans and debt securities.
The desire to restructure may be driven by a distressed situation or be opportunistic, given the low trading prices of debt, particularly in the commercial loan market. There are various approaches to restructuring those obligations in order to reduce outstanding debt and debt-service costs. As was made clear by the December 2008 decision of Vice Chancellor Lamb of the Delaware Chancery Court in the Realogy case, the feasibility of any such debt restructuring depends on a company's capital structure and available cash, and the covenants in its debt and other instruments. The Realogy decision turned on a specific definition in the senior secured credit facility: it should not prevent or deter other debt...