International Updates – Liability Management in Europe 2026

LIABILITY MANAGEMENT IN EUROPE

What to Watch in 2026

Article courtesy of Barry Russell, Tom Bannister, Chris Parrott, Dan Fisher, Charlie Hely, Jaisohn Im, Hermione Allen, Justine Erickson and David Califano (Akin)

What Is “Liability Management”: A Refresher

Liability Management is a term that has been in use for years and traditionally referred to routine activities undertaken by borrowers to manage their capitalisation through a variety of options, including tender offers, exchange offers, refinancing, equity injections or disposals. In Europe, traditional “amend and extend” transactions are a common method of liability management. More recently, the term “Liability Management Exercise” (or “LME”) has crept into the vernacular and refers to strategies which are outside of the ordinary course and employed by borrowers for some advantage (e.g. haircut, maturity extension, liquidity management), which may be done on a pro rata basis to all affected creditors, or on a non-pro rata basis.

LME structures typically leverage the more permissive regimes in New York law governed debt documents (which generally have weaker sacred rights and creditor protections than their English law counterparts) to restructure debt whilst avoiding the need for a court-sanctioned process. European leveraged lending practice has adopted New York law financing structures with increasing frequency. These more permissive documents, combined with the use of mechanics contained in the English law intercreditor agreements that often accompany such European financing arrangements, enable European borrowers to use LMEs and LME-adjacent structures (often combined with distressed disposals under the intercreditor agreement) to enact comprehensive restructurings with minimal or no court involvement.

Where creditor consent is needed (which is not always the case – as the borrower is often able to implement certain LME transactions without any creditor consent), majority-minority dynamics can often drive these transactions as the risk of losing out encourages creditors to play along. This has led to the introduction of cooperation agreements to attempt to balance the debtor-creditor negotiation dynamic.

Examples of commonly-used LME transaction structures include (i) “Drop Downs”: transfers of material assets to non‑guarantor or unrestricted subsidiaries to allow a debtor to raise new borrowing secured by those assets on a structurally senior basis to existing indebtedness, either with or without creditor consent depending on documentary requirements, and (ii) “Uptiers”: subordinating the collateral in lien priority and/or payment priority of the obligations under existing indebtedness, which may often be structured on a non-pro rata basis; such transactions can be driven by the borrower/sponsor (with creditor consent) or by creditors themselves (with borrower consent as part of the restructuring) and enables the majority creditors to improve their position (whether structurally or contractually) vis-à-vis the other creditors.

 

The European Perspective: Looking Back and Ahead

LMEs have been common in the US market for some time. In Europe, the market had been more reticent to embrace significant structural LMEs without negotiated creditor consensus despite their success and relative normalcy in the US. That reticence may have been for a number of reasons – for example, the general higher duty of care for directors across many European jurisdictions, the comparatively smaller European market, English law concepts which might afford some minority creditor protection under an English law intercreditor agreement, and the availability of court tools which historically have been considered more flexible than a US Chapter 11 and able to deliver similar results to an LME (with the additional benefit of court approval).

Despite past hesitancy to adopt US-style LMEs, 2025 looks to  have been a turning point with a number of highly-publicised LME transactions hitting the European market. Indeed, several of those LME transactions were non-pro rata (Selecta, Hunkemöller and Victoria) perhaps signifying Europe as the new frontier in progressive LME activity given the US market is increasingly shying away from non-pro rata transactions – a trend which has strengthened following the United States Court of Appeals for the Fifth Circuit’s decision in the Serta litigation at the end of 2024 – and focusing more on building consensus to reduce litigation risk.

That said, last year also saw a concerted effort by creditors to push back against LME actions which are non-pro rata or which are particularly detrimental to an entire existing creditor group (Altice International). It is notable that the second exchange transaction proposed by Victoria was withdrawn due to poor uptake and noteholder resistance, and that LME litigation has commenced or is threatened across various forums in Selecta and Hunkemöller – including in the English, Dutch and New York courts. The multijurisdictional nature of European corporate structures may provide more forums for challengers to raise objections than have been seen following largely domestic US LME activity, which increases opportunities for challenges and risks overlapping decisions. The outcome of this litigation (especially given the similarities in legal issues raised across the different transactions being challenged) may not only start to draw lines on the boundaries of LME-style transactions in Europe, but may also affect or otherwise further refine what are currently considered to be widely-accepted existing market practices (e.g. English law distressed disposal mechanics and implementation of common European enforcement structures).

In any event, we expect 2026 will build on the LME developments of 2025 and that we will continue to see borrowers (and creditors) evaluating the merits of various LME options (either alone or combined with another restructuring tool) as part of their restructuring toolkit when confronting a maturity wall, payment default and/or an overly burdensome debt load.

 

European Case Studies

Note: All information contained herein is based on publicly available information, including public disclosures, court filings and market reporting.

(1) Hunkemöller

What happened?

In 2024, Hunkemöller arranged a series of transactions with its largest senior secured noteholder (the “Majority Holder”) under its existing 9% senior secured notes due 2027 (the “SSNs”), to provide for an uptier of €186 million of the Majority Holder’s SSNs by swapping them into “first out” senior secured notes (“1O SSNs”) under a new global note with payment priority over the remaining senior secured notes (“2O SSNs”) (with no offer made to the minority holders to participate), and to approve a series of amendments to the terms of the SSNs with simple majority consent. Following the initial uptiering transaction, the Majority Holder also provided a €50 million super senior loan to Hunkemöller.

In early 2025, the Majority Holder provided a further €25 million interim facility, upsized the super senior loan and purchased outstanding drawdowns from the company’s super senior revolving credit facility. In connection with (and understood to be a condition of) the provision of additional funds, the Company inserted a “Double Luxco” into the holding structure of the group and granted a Luxembourg share pledge in favour of creditors. This created a single point of enforcement following an event of default. In March 2025, there was an interest payment default  and the Majority Holder, acting as the “instructing group” under the intercreditor agreement, instructed the security agent to take steps to enforce under the Luxembourg share pledge. The enforcement provided for the transfer of ownership of the group to a special purpose vehicle owned by the Majority Holder for €1 plus €86.7m as consideration for certain liabilities, of which €1.7m was allocated to the senior secured creditors, with €1.3m available for SSN liabilities. No amounts were paid to the 2O SSNs. This was based on a valuation report showing value breaking in the super senior debt. The 1O SSNs and 2O SSNs were cancelled following the transaction.

 Challenges

An ad hoc group of minority holders of SSNs (the “Minority Holder AHG”) have brought proceedings in New York, England, the Netherlands and Luxembourg challenging aspects of the Hunkemöller transaction.

In New York, the key challenge is around breaches of the New York law governed indenture. It focuses on a breach of the payment for consent provision (which was removed as part of the 2024 transactions) and other breaches in connection with the uptier which provided the grounds to enable the enforcement instruction and distressed disposal in 2025. The claim partially survived a motion to dismiss, with the claims expected to be heard in Q2/Q3 2026.

In England, the Minority Holder AHG has brought a challenge in the London High Court seeking to unwind the enforcement steps and the distressed disposal transaction conducted under the English law intercreditor agreement. There are three main grounds for challenge:

• first, that the Majority Holder was not a senior secured creditor at the time the enforcement instruction was given as: (1) the 1O SSNs issued as part of the uptier were invalid and issued in breach of the indenture, and (2) the Majority Holder’s SSNs had been irrevocably cancelled as part of the 2024 uptier transaction. As majority senior secured creditor consent was a necessary element of a valid instruction under the intercreditor agreement, the Majority Holder would have been unable to validly instruct the security agent to enforce the share pledge;
• second, that the security agent was complicit in the arrangements and was aware of the invalid instructions (or turned a blind eye to them); and
• third, that there was a breach of the English law Assenagon principle (namely that a majority must use its contractual powers in good faith and for the benefit of the class of creditors as a whole, and not merely for individual members or for collateral purpose) as implied into the English law intercreditor agreement.

The Hunkemöller transaction presents a relatively novel opportunity for the English courts to consider the Assenagon principle in the context of distressed disposals under English law intercreditor agreements. This decision could affect use cases for English law intercreditor agreements and distressed disposals more generally, and will be closely watched by practitioners.

In the Netherlands, pre-litigation discovery actions were brought and recently rejected by the Dutch courts. The pre-litigation actions were brought to support upcoming claims the Minority Holder AHG intend to bring seeking damages and a declaration of “transaction nullity” in the Netherlands. They claim that the directors breached their duties and Holdco (owning the shares in the Double Luxco) breached the terms of the intercreditor agreement. The central question is whether the actions can be characterised as unlawful in the sense of being contrary to what is considered “proper social conduct” according to unwritten law (a category of tort under the Dutch Civil Code), and whether parts of the transaction should be considered contrary to “public decency”, which they claim should lead to nullity.

In Luxembourg, pre-litigation discovery proceedings are also being brought by the Minority Holder AHG against a Luxembourg entity in the holding structure to obtain information in respect of the formation of the Double Luxco structure inserted into the group and the enforcement and distressed disposal transaction.

We note that beyond the outcome of each piece of litigation itself, it will also be interesting to see how courts manage the cross-border elements of the transaction (and potential conflicts of law) where facts touch the New York law indenture, the English law intercreditor agreement, and the Dutch enforcement – and whether the elements of the transaction will be viewed as a single comprehensive restructuring, or separate transactions with discrete legal implications. This case (together with the Selecta transaction (see below) and those to come) will inevitably impact LME and distressed disposal strategies in the future involving European structures.

(2) Selecta

What happened?

The original capital stack of the Swiss vending machine operator consisted of €150 million super senior RCF due January 2026 (the “SSRCF”), €821 million first lien notes due April 2026 (the “1L Notes”), and €377 million second lien notes due July 2026 (the “2L Notes”).

In January 2025, an ad hoc group of holders of 1L Notes and 2L Notes (the “AHG”) extended the cure period on an interest payment default under the 1L Notes and provided a €50 million super senior bridge facility for the restructuring.

In April 2025, the cure period for the interest payment default expired and the majority senior secured noteholders instructed the security agent to enforce on the Dutch share pledge of Selecta Group B.V. In May 2025, the Dutch Commercial Court approved the private sale of the shares of Selecta to a special purpose vehicle owned by the AHG (“Bidco”) for €1 (plus non-cash consideration of the assumption of debt). The sale was approved without a hearing.

In June 2025, the sale was finalised and a new capital structure was implemented as follows:

• the SSRCF was refinanced through the new money offer (described below);
• existing holders of the 1L Notes received, on a pro rata basis: (a) “third out” notes due 2030 (the “3O Notes”) issued by Bidco at 85% of principal face value of the 1L Notes, and (b) 15.3% of Class B non-voting shares of the parent entity in the structure (“Topco”); and
• existing holders of the 2L Notes received, on a pro rata basis: (a) 1% of Class B non-voting shares of Topco, and (b) the right to participate in the new money offer.

After the recapitalisation, Bidco initiated an exchange offer whereby it offered holders of the 3O Notes the opportunity to exchange their 3O Notes (and Topco equity) into “first out” new notes due 2030 (“1O Notes”) at 100% of the principal value of their previous 1L Notes (reversing the 15% reduction upon enforcement). The 1O Notes provided that during the first twelve months of the tenor, sacred rights could be amended with a simple majority consent (reverting to 90% thereafter), and the “payments for consent” clause would not apply during the reduced consent period. As the AHG held ~65% of the aggregate principal of 1L Notes (exchanged into 1O Notes) subject to a cooperation agreement in place until the end of the reduced consent period, the AHG could likely use the amendment rights to implement another LME or make other material amendments to the 1O Notes without minority lender support. As part of the exchange offer, the 3O Noteholders would also have to accede to a deed of release and sign a transaction support agreement.

The decision for the minority holders of 3O Notes was therefore: (1) to accept a haircut on their debt position and be third-out in priority but with some equity in Topco and retain the rights to pursue legal remedies in respect of the transaction, or (2) to maintain the full principal amount of their original 1L Note position but be at risk of being subordinated by the AHG at a later date.

Reporting indicates that < 40% of non-AHG holders of 3O Notes accepted the exchange for 1O Notes.

At the same time as the 3O exchange offer, former holders of 2L Notes were offered the opportunity to provide their pro rata share of up to €100 million in new money in exchange for second-out notes due 2030 (“2O Notes”), which amounted to 10% of the aggregate principal of 2O Notes if fully subscribed. Bidco also issued €156.4 million 2O Notes through a private placement to former 2L Noteholders in the AHG. The new money providers were also eligible to receive a pro rata share of 62.7% of Topco equity as Class A1 shares upon accession to a deed of release and execution of a transaction support agreement. Certain holders of 2L Notes in the AHG backstopped the new money offer and received 20% of Topco equity as Class A2 voting shares.

Behind the Scenes: AHG Cooperation Agreement

In November 2024, it is understood that the AHG entered into a form of cooperation agreement. In April 2025, the AHG entered into a separate cooperation agreement effective from the date of issuance of the 1O Notes that terminates upon the expiry of the reduced consent period under the 1O Notes. The full terms of the cooperation agreement(s) have not been disclosed publicly but based on information made public as part of the New York litigation (see further details below), it appears the cooperation agreement may have included the following features:

• no trading unless purchasers signed up to the cooperation agreement (and it is noted that the AHG reportedly refused to allow other holders of the 1L Notes to accede to the cooperation agreement);
• agreement not to engage in or support any transaction other than a transaction where all members of the AHG were provided the opportunity to have the Subject Instruments (as defined therein) retained, replaced or amended on a pro rata and pari passu basis;
• an indemnity from Bidco for any claim arising from the restructuring, which indemnity would be first ranking in priority to the 1O Notes; and
• agreement not to support or participate in any transaction that would not benefit the AHG (or would offer “advantageous treatment” to other creditors).

Challenges

The Selecta transaction has led to proceedings in both the New York and Dutch courts.

In New York, the claims focus on a number of grounds, including:

• breaches of the Sherman Act and Donnelly Act on the basis of (i) unlawful pricing fixing and group boycott, and (ii) unlawful agreement to restrain trade in the debt that was subsequently restructured, in each case as a consequence of the exclusionary cooperation agreement that was implemented between the favoured creditors;
• breach of the New York law governed indenture (various clauses, including breaches of the non-payment clause, non-ratable distribution provisions, amendment provisions, and non-permitted release of guarantees);
• breach of implied duty of good faith and fair dealing on the part of Selecta itself, as well as breaches of fiduciary duties;
• a claim under English law for breach of the same Assenagon principle that is being raised in Hunkemöller;
• a claim under Dutch law for breach of fiduciary duties of the directors;
• tortious interference with contract; and
• a claim under principles of equity seeking an equitable first-priority lien over collateral previously secured in favour of the 1L Notes.

The plaintiffs seek damages, an equitable first-priority lien, an order enjoining certain defendants’ anti-competitive conduct, and an order declaring the cooperation agreement void.

In the Netherlands, the complainants seek to appeal the decision of the Dutch court to allow the enforcement over the shares in Selecta to the Bidco controlled by the participating creditors, including that:

• the court was not given all of the relevant details of the subsequent exchange transaction that was launched following the enforcement;
• the complainants were not given the opportunity to appear at the hearing;
• the security agent failed to adequately protect minority creditors’ interests and did not properly notify the minority creditors;
• breach of requirement under the intercreditor agreement to distribute share enforcement proceeds rateably; and
• the Dutch share pledge enforcement and wider exchange transactions were unreasonable and permitted the AHG to extract disproportionate value.

The Dutch proceeding will be interesting as it seeks to appeal a Dutch share pledge enforcement following court approval of the private sale of the shares, which is ordinarily an unappealable decision (except in certain circumstances). A hearing to determine standing to appeal is set for April 2026.

(3) Victoria

What happened?

The original capital stack of the publicly listed PLC consisted of €500 million senior secured notes due August 2026 (the “2026 SSNs”), €250 million senior secured notes due 2028 (the “2028 SSNs”) and a £150 million super senior RCF which matured in February 2026 (the “SSRCF”).

First, in June 2025, Victoria refinanced its SSRCF with a new £130 million super senior facility (consisting of an RCF and a delayed draw term loan) (the “New Facilities”).

Next, Victoria launched two consent solicitations and an exchange offer:

• The first consent sought to extend the 2026 SSNs’ maturity to 2031 and reduce the coupon to 1% (from 3.625%). This consent required 90% consent under the 2026 SSN indenture.
• The second consent was sought for a covenant strip and subordination of both the 2026 SSNs and the 2028 SSNs, whereby the trustee was instructed to enter into a subordination and turnover agreement. This consent required only majority consent.
• The exchange offer was made to the 2026 SSNs to exchange their notes into new first priority notes due in 2029 (the “First Priority Notes”).
• Separately, around one third of the 2028 SSNs were offered privately to exchange their 2028 SSNs.

The First Priority Notes and the New Facilities contained a springing maturity mechanic that would result in debt repayment of the First Priority Notes, the New Facilities and the 2028 SSNs upon the 2028 SSNs’ maturity.

Later in 2025, Victoria made an offer to extend the maturity of the remaining 2028 SSNs to 2031 with a 12% PIK coupon (no cash element) (the “2031 PIKs”). As a carrot to entice participation, Victoria offered the 2028 SSN holders that participated an exchange rate of 52.5% (well above the prevailing trading price at that time), a 25bps early participation fee, and a springing maturity ahead of any 2028 SSNs that did not participate. The 2031 PIKs would have been senior to the remaining 2028 SSNs but junior to the First Priority Notes and the New Facilities. Only a simple majority was required for the transaction.

However, this further exchange offer was withdrawn in October 2025 due to poor noteholder feedback. Victoria will have to solve for the 2028 SSNs and the springing maturities in another manner, which could be complicated by any tensions that may remain between the company and the remaining holders of the 2028 SSNs.

(4) Pfleiderer

What happened?

The original capital stack consisted of €400 million senior secured notes due 2026 and €350 million senior secured FRNs due 2026 (together, the “2026 SSNs”) as well as a €65 million super senior RCF (the “SSRCF”).

In 2024, Pfleiderer initiated an exchange offer to exchange the outstanding 2026 SSNs for new senior secured notes due 2029 (the “2029 SSNs”) with improved terms compared with the 2026 SSNs, including:

• economic uplift with a PIK payment on top of the cash interest payment; and
• significant tightening of the covenants to (1) limit Pfleiderer’s ability to raise “priming debt”, (2) reduce value leakage, and (3) add a series of other LME blockers (including a general prohibition on liability management transactions – but not, notably, a “J.Crew” style blocker to prevent certain unrestricted subsidiary designations).

The exchange offer was unanimously approved by all holders of the 2026 SSNs. The SSRCF lenders also agreed to a maturity extension to 2029.

In December 2025, Pfleiderer surprised the market by announcing that it had sold 90% of its Silekol specialty chemicals business to Maple Group, a newly formed “unrestricted subsidiary”.   Maple Group then entered into a €110 million senior facility due December 2028 and procured a €25 million shareholder loan against the Silekol assets. The transaction was structured as an asset sale to the unrestricted subsidiary, meaning that the “restricted payment” (i.e., value leakage) capacity was not required beyond the amount required to designate the unrestricted subsidiary.

As consideration for the 90% sale, the restricted group received a promissory note and a portion of the €135 million raised by the sale. This new funding provided additional liquidity to Pfleiderer.

No challenge has yet been initiated.

(5) Altice

What happened?

In October 2025, Altice France announced that it had completed an accelerated safeguard procedure (procédure de sauvegarde accélérée) in France, which reduced the group’s indebtedness and extended applicable maturities. The net debt stood at c. €15.8 billion, and the owner maintained 55% of the equity with creditors owning the remaining 45%.

Altice France’s debt documents contained permissive covenants, notably its builder basket which was backdated to 2012, resulting in an estimated total investment capacity of c. €12 billion.

On 28 November 2025, Altice International surprised its creditors by announcing in the publication of its Q3 2025 results that (with the unanimous support of its board of directors) Altice International had designated Altice Portugal S.A. (which held substantially all of the group’s operations in Portugal) and Altice Caribbean S.à r.l. (which held substantially all of the group’s operations in the Dominican Republic) as “unrestricted subsidiaries” under each of the instruments governing its indebtedness. In the case of Altice Caribbean S.à r.l, this company was ultimately distributed as a share premium up to a parent company, thereby removing it from the restricted group.

In addition, a subsidiary of the now unrestricted subsidiary Altice Portugal S.A. had raised €750 million for general corporate purposes and working capital needs in a private transaction. Altice International also indicated that it had earmarked €2 billion of incremental debt capacity at Altice Portugal S.A. to enhance liquidity and support a strategic review and subsequent disposals.

No challenge has yet been initiated.