The Leveraged Loan Market and the Impending Buyout Bust

• Moderator: Katherine Waldock, Millstein Center at Columbia
• Commentators:
  • Tony Casey, University of Chicago
  • Jared Ellias, Harvard
  • Edith Hotchkiss, Boston College
  • Edward Morrison, Columbia
  • David Skeel, University of Pennsylvania

Over the last decade, low interest rates and aggressive quantitative easing have resulted in strong demand for highyield investments. Corporate borrowers have enjoyed unique leverage and have been able to draft debt instruments with fewer creditor safeguards and various trap doors.

Private equity sponsors have led this charge, and some players have recently begun exploiting contractual loopholes to seize value in distress scenarios. Creditors are being pitted against other creditors in an ever-radicalizing model. These nascent battles—which have been observed at several prominent companies, including Caesars Entertainment, Neiman Marcus, and J.Crew—raise concerns about the potential harm to the U.S. economy if a financial downturn leads to a battle for control over some of the nation’s largest companies.

The effect of this credit-on-creditor violence is difficult to assess because the facets are not fully understood. Shifts in creditor and lender composition have exacerbated the complexity and opacity of the leveraged loan and distressed debt markets – rendering these markets more susceptible to downturns and amplifying contagion risks for global economies.

This interdisciplinary symposium seeks to bring together diverse scholars to address the new dynamics that are reshaping the field. It also seeks to create a dialogue among scholars and practitioners of finance, bankruptcy law, capital markets, and economics. We hope to be at the leading edge of private equity’s next phase.