Distressed US companies are increasingly resorting to debt restructurings to avoid expensive bankruptcy proceedings, but many borrowers ultimately end up in court anyway with their deals amounting to little more than can-kicking exercises.
Almost three-quarters of US corporate debt defaults last year were out-of-court distressed exchanges, where a company offers creditors assets worth less than their original bonds or loans, according to a report by Moodys this month. That is up from roughly half in 2020, the rating agency said.
Moodys predicts that far-reaching private equity ownership of companies with very weak ratings will further fuel the growth of distressed exchanges because this type of restructuring can protect such backers …
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