Our Legal Insights Blog

The Japanese LBO market still has what disappeared from the US and European markets a decade ago: a commercial bank on the senior piece and a maintenance covenant still in the deal. Last night at the Andaz in Tokyo, we sat down for the second Covenant Exchange dinner of this APAC run to work out how long those things will hold. I was delighted that the conversation went deep into Japanese market structure - I had so much to learn.

I was delighted to attend the PDI Seoul Forum this week. Two hundred and fifty attendees, fourteen countries, and a program built around the question every allocator in the room was already asking. What is behind the recent private credit headlines, and should it change how capital gets deployed from here?

The fourth stop on my global documentation risk roundtable series brought me to Seoul, and it was one of the most diverse conversations in the series so far. The room included professionals working across real estate, private credit, infrastructure, life insurance allocation, fixed income, and fintech. Different asset classes, different parts of the capital structure, and a very different legal and cultural context to the European and US markets I spend most of my time in.

Liability management exercises are no longer the exception. They are a standard part of the sponsor toolkit, and the documentation written just a few years ago is now allowing sponsors and their lawyers to restructure thebalance sheet within the four corners of a credit agreement. In tech and software, that risk is more dire than in any other sector, because the value that moves is the entire value of the business.

We can no longer assume that funds will be repaid to lenders at par. That was the opening message to the room as we filmed our newest course at Fox Legal Training: A Framework for Analyzing Liability Management Exercises, now available on the FLT platform.

Last week, I attended Bloomberg’s fourth annual CLO Summit in London. The conversation was more measured than the headlines have been suggesting. 2025 was a record year for new issuance, resets, and refinancings. Investor demand was strong across the capital stack, and CLOs continued to function as the largest buyer of leveraged loans in Europe. The structure held up, even with geopolitical noise running in the background.

Something is shifting in the markets. Inflation expectations hit 5.2% last week in the US, the highest since March 2023. Three weeks ago the bond market was pricing in rate cuts. Now the probability of a Fed rate hike by year end (24.6%) is more than three times the probability of a cut (7.5%). Fed fund futures have pushed the next expected cut all the way out to October 2027. That’s the picture in America, but if you think Europe is insulated, think again.

Last week, I hosted a breakfast roundtable in Paris with a group of European credit professionals. The room included CLO managers, high yield portfolio managers, direct lenders, distressed investors and stressed credit analysts. What they had in common was that they are all grappling with documentation risk in one way or another.