Navigating Distress: Liability Management Exercises as Tools for Corporate Resilience, Stakeholder Recovery, and Long-Term Outcomes
Moore, Nate
Moore, Nate
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2025-05-19
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Abstract
This thesis investigates the evolving role of Liability Management Exercises (LMEs) as tools for corporate restructuring among financially distressed U.S. firms. Through a comparative case study analysis of Caesars Palace, Serta Simmons, and Incora, the research evaluates the effectiveness of LMEs in achieving financial stability, sustaining operations, and optimizing stakeholder recovery outside of formal bankruptcy proceedings. While LMEs offer short-term liquidity relief and can avert reputational damage, their use often provokes legal disputes, particularly when creditor rights are restructured asymmetrically through uptiering or drop-down strategies. This study highlights the tension between innovation in financial engineering and equitable treatment of stakeholders, emphasizing the growing influence?and potential conflicts of interest?of investment banks and private equity sponsors in restructuring decisions. The findings underscore that the long-term success of LMEs depends not only on deal structure but also on legal defensibility, creditor cooperation, and operational improvements. As LMEs become increasingly complex and contested, this thesis calls for enhanced transparency, regulatory scrutiny, and governance reform to ensure fair and sustainable outcomes in distressed corporate finance.