LMEs in European restructurings: local law constraints and evolving market practice

Liability management exercises (LMEs) are reshaping European restructurings by delivering targeted, out-of-court capital structure solutions while avoiding the expense and lengthy timescales of court processes. As US-style techniques proliferate, parties must adapt structures to European jurisdictional constraints including diverse local directors’ duties and insolvency regimes, and where English law-governed documents are present, the Assénagon abuse of power principle. Recent transactions illustrate emerging market norms and potential litigation flashpoints. In response, creditors are seeking to tighten documentation through LME blockers and deploying co-operation agreements, even as antitrust and enforceability challenges test their limits.