Restructuring Adviser, Americas Restructuring Adviser and EMEA Restructuring Adviser: Houlihan Lokey
Wired for success No matter what the transaction was in 2024, if it was restructuring, Houlihan Lokey was probably involved, advising creditors within its huge roster of buyside clients or companies in distress looking to avoid disaster. Houlihan Lokey is IFR’s Restructuring Adviser, Americas Restructuring Adviser and EMEA Restructuring Adviser of the Year.
Houlihan Lokey had an enviable roster of clients in 2024, including advising creditors stuck in major situations such as Lumen Technologies, Endo Pharmaceuticals and McDermott International.
On the debtor side, the firm advised companies including Columbia Property Trust, Babel Finance, Dynata and TriMark – leaving its mark on those and all the cases it was involved in and doing its level best to make sure its clients achieved the best possible outcome.
Houlihan also advised sponsors on major situations, for example acting for SoftBank as its investee company WeWork went through a high-profile Chapter 11 process, which saw the Japanese investor preserve capital despite a debt-for-equity swap as it put new senior money into the flexible office provider.
“About two-thirds of our business comes in without us even having to pitch,” said Jonathan Cleveland, managing director at Houlihan Lokey. “That’s a strong statement to our reputation and presence in the marketplace.”
Far from resting on its reputation as the go-to creditor adviser Houlihan has engaged in what Cleveland calls “a frenetic initiative to fully cover the universe of sponsors and CLOs”.
In fact, the firm’s US creditor client base has predominantly shifted from distressed funds to CLOs and direct lending platforms with different restructuring approaches and ideology.
While its role in advising clients is tilted towards advocating for creditors – a nearly two to one ratio – the firm takes a variety of roles in transactions.
“We play in every position and it really gives us an advantage,” Cleveland said. “We are not just one-dimensional.”
And it has shown up in Houlihan’s bottom line. The restructuring group is performing the best it has in its history.
“We are at peak level performance,” Cleveland said.
While most restructuring pros came into 2024 expecting the market to cool from levels experienced after the pandemic, the duration of the current cycle has proved to be longer than anticipated.
Houlihan has normalised revenue from restructurings above US$500m, which in a non-crisis environment is extraordinary, Cleveland said. The firm had closed 115 engagements involving more than US$300bn of debt by mid-November.
“We have the largest [practice] by transactions and largest revenue in restructuring transactions,” Cleveland said. “That comes not only from doing the most, but doing the best,” he said. “We are innovative and at the forefront of every major deal in the marketplace.”
That includes advising creditors holding some US$11bn of Lumen’s debt across 10 layers of its capital structure, a key role in one of the most significant restructurings last year.
Light bulb moment
Lumen, formerly known as CenturyLink, is the third-largest provider of telecoms services in the US. Struggling with some US$20bn of debt, the company moved to sell assets hoping to pay down some of that mountain of debt. While the move was intended to push out maturities, selling assets to pay off subordinated debt may have harmed senior creditors.
The strategy may also have triggered a default under certain bond covenants. Lumen argued that it certainly did not default. Bondholders argued that it certainly did. Either way, the dispute was the catalyst for a transformative deal.
Houlihan was able to push a “very consensual" liability management deal across the finish line, extending most maturities to 2029.
“It’s the largest and most complex LM transaction and one of the most successful ever,” said Alex Raskin, managing director at Houlihan. “It was a success for everyone: creditors in the group, creditors outside the group, inside the deal, outside the deal,” he said.
The firm deftly managed the massive creditor group throughout the process, despite their often conflicting goals. The conference calls for the group, with sometimes between 200 and 300 people attending, offered a master class in organisation.
The transaction, which swapped most of the company’s debt for longer-dated notes with higher interest rates and uptiered some unsecured notes to second-lien notes, also left the company with enough capacity to continue negotiating with holdout creditors.
The final transaction tightened covenants on its debt and settled the issue of default.
Houlihan’s group also backstopped US$1.3bn in new money financing. The loan was negotiated as interest rates were ticking up and the market was opening up, giving the company a broader array of options to pursue an alternative deal.
Top marks for TriMark
For food service equipment supplier TriMark, Houlihan played a pivotal role structuring and negotiating the capital raise and exchange offer that put the company back on its feet.
It was able to win full consent from more than 30 lenders to implement the transaction.
But first, Houlihan raised a US$35m bridge financing to keep the lights on. The operating cash gave Houlihan time to find all the company’s creditors, even CLOs holding a mere US$1m, to win consent for an exchange offer.
The deal was made more complicated by a previous LM exercise that left some creditors in a foul mood.
Faced with imminent maturities in 2024, Houlihan advised TriMark on its US$350m new money rights offering and an exchange offer for a portion of its US$1.3bn capital structure.
The proceeds partially paid down an asset-backed loan and cashed out the first-out first-lien lenders. The second-out first-lien term loan lenders received a portion of a new first-lien term loan and some discount equity. The third-out first-lien term loan lenders and second-lien lenders took equity and a portion of a new payment-in-kind loan.
The transaction highlights what comes out of a lot of LM transactions that create very complicated capital structures, said David Hilty, managing director and global co-head of financial restructuring.
“Ultimately we needed to do a full-scale restructuring following the earlier LMs, negotiating with all the parties,” Hilty said. While an in-court bankruptcy restructuring would have given the company more flexibility, increasingly the cost is putting the option out of reach for small and mid-sized companies.
Solid result
Beyond the Americas, Houlihan continued its multi-year mandates advising a slew of Chinese property companies, highlighting progress at Sino-Ocean Group, which is going through a UK restructuring plan. It now has more advisers working in Asia-Pacific than in London.
The firm remains active across Europe and the Middle East as well, and like the Americas, made a strong push to pick up debtor-side mandates, most notably at Swedish debt collector Intrum and Irish packaging producer Ardagh Group. Both were attracted to the firm’s global capabilities, allowing Intrum for instance to use the US Chapter 11 bankruptcy process.
In Germany, it advised the senior creditors of Tele Columbus on a €1.34bn scheme of arrangement, which saw those instruments extended by six years but with enhanced terms. The deal kept the fibre network provider’s sponsor fully involved through a €300m equity injection.
Another highlight was the restructuring of furniture maker Keter, which was founded in 1948 in Israel by the Sagol family. The company had been sold to financial sponsor BC Partners in 2016 but the pandemic and Russia-Ukraine war had hurt the business.
Houlihan was brought in to advise an ad hoc group of secured lenders in early 2023 ahead of certain liabilities maturing that year. A bridge facility was put in place before a planned second-stage recapitalisation but the situation changed drastically as the Israel-Hamas conflict ensued.
Houlihan kept the plan on track and closed the deal with its clients taking control through a debt-for-equity swap in April. “Keter was special as it broke precedents and we were able to negotiate a good deal for creditors,” said Gijs de Reuver, managing director at Houlihan, pointing out that most importantly both stages of the deal were done out of court, avoiding a huge expense.
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