The New Rules of Corporate Distress | How Out-of-Court Restructurings are Reshaping Finance

The corporate restructuring landscape has fundamentally shifted, with 75% of defaults now handled through out-of-court distressed exchanges rather than traditional Chapter 11 bankruptcies. This transformation has enabled aggressive "creditor on creditor violence" tactics where financing lawyers use financial engineering to preserve private equity ownership while forcing losses onto less sophisticated creditors. While companies like Carvana have achieved dramatic value creation through these methods, data shows many firms eventually default again, raising questions about whether this represents innovation or problematic financial gamesmanship that merely defers larger problems.

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