Our Legal Insights Blog

During our roundtable discussion in Los Angeles, our guests – representing investors, advisors, and covenant specialists – discussed how distressed investing has changed, particularly in the era of liability management exercises (LMEs), co-op agreements, and increasingly flexible documentation. The conversation was so in-depth we were only able to take photos after it was already over!

Over breakfast and coffee, a room full of lenders, investors, and credit professionals gathered to talk about something that has quietly reshaped European leveraged finance over the last decade: documentation risk – and the implications of borrowers actually using the flexibility they’ve negotiated. What followed was not a technical training session or a legal lecture. It was a candid, experience‑driven conversation about how we got here, what has changed in practice, and what lenders can realistically do next.

Asset Sale covenants are viewed as protective: if a borrower sells assets, lenders expect either reinvestment in the business or debt repayment. In theory, these provisions preserve credit quality by preventing value leakage. In practice, however, modern drafting frequently gives borrowers far more flexibility than investors appreciate – especially in stressed situations.

When considering what to write for my 2026 outlook – what helpful information I could impart – I realized that LMEs, litigation and market factors will all be covered in our Knowledge Series events for January with our guests Shan Qureshi and Jeanine Arnold, and much better than I could do alone.

2025 marked a pivotal shift in leveraged finance, with borrowers aggressively testing liability management exercises (LMEs), courts issuing landmark rulings on uptier transactions, and lenders mainstreaming protective "blockers" in documentation. The year finished with a bang as Altice USA followed Selecta’s lead in taking legal action against cooperation agreements – setting up 2026 to be a transformative year for the leveraged finance market.

Yesterday marked our 12th in-person event at The Ned, and we wrapped our newest course, an exploration of an investigative journalist’s approach to financial diligence featuring a case study on the First Brands situation. Rob Smith, Corporate Finance Editor at The Financial Times and the journalist who broke the story, shared with FLT guests his approach to uncovering corporate fraud – a process backed by a long list of discoveries from Abengoa to Casino to Greensill, and most recently, First Brands. In this blog, I share some of the key insights from the day – and introduce the newest special offer from FLT.

FLT is delighted to present our newest course: Following the Money: Lessons from an investigative journalist on First Brands, which will take place on November 19th at The Ned in London, presented by Rob Smith, the jorurnalist who broke the story for The FT. effective credit analysis combines legals and financials, and a solid downside risk assessment must consider the four corners of the financial statements.

Covenants have grown more complex with every market cycle. Since the Global Financial Crisis, borrower flexibility has expanded, terms have converged across instruments, and the legal language underpinning leveraged finance has become increasingly technical. The result? A landscape where instruments are converging, terms are evolving, and professionals need legal fluency to keep pace. That's why Fox Legal Training has developed its newest course, our Leveraged Loan Covenant Training (LLCT).