Liability management exercises: A new playbook for institutional investors 

In an increasingly complex credit landscape, institutional investors face mounting challenges as they navigate the intricacies of distressed asset opportunities. Liability Management Exercises (LMEs) have emerged as essential strategies for sophisticated investors seeking to optimize their portfolios amid higher interest rates and looming maturities.

As traditional recovery expectations shift, understanding the nuances of LMEs becomes critical for institutional investors aiming to enhance their resilience and capitalize on emerging market dynamics.

This whitepaper delves into the various types of LMEs, their implications for creditor relationships, and the evolving regulatory landscape. It offers valuable insights for those committed to effective distressed investing.

We address several key points:

• The rise of covenant-lite debt and its impact on investment strategies, equipping institutional investors with the knowledge to adapt to changing market conditions.
• How LMEs serve as essential tools for institutional investors to navigate complex debt restructuring scenarios in a volatile credit market.
• Specific LME strategies, such as Up-Tier and Drop-Down Transactions, and their practical applications for optimizing distressed asset portfolios.
• The implications of "creditor-on-creditor violence," helping investors assess risks and recovery expectations in competitive distressed investing environments.

Mercer’s global team is ready to help navigate the evolving credit landscape and unlock the potential of today's dynamic market environment.

Whether you're considering alternative investments for the first time or have an established investment portfolio, our flexible approach can help you achieve your goals. Contact a Mercer consultant today to get started.