Debt Restructuring: What Every Business Owner Must Know
Out-of-court debt restructuring demands early, strategic action.
Date:
December 14, 2025
Category:
Bankruptcy & Receivership
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The U.S. corporate debt restructuring market has undergone a fundamental transformation over the past 18 months.
In 2024 alone, 694 companies filed for bankruptcy, the highest annual figure since 2010.
Yet beneath these headline numbers lies a more significant shift: 85% of corporate defaults are now resolved through out-of-court restructurings, compared to just 28% historically.
For business owners, lenders, and board members navigating financial distress in 2025, understanding debt restructuring is no longer an academic exercise. It's a strategic imperative.
The playbook has changed, the tools have evolved, and the stakes have never been higher.
What Debt Restructuring Actually Means
Debt restructuring is the process of renegotiating the terms of existing debt obligations to avoid insolvency or improve a company's financial position. This can occur either before or during formal bankruptcy proceedings.
The critical distinction is not definitional but strategic. Modern debt restructuring exists on a spectrum:
Pre-bankruptcy restructuring involves consensual negotiations between borrowers and lenders to modify loan terms, extend maturities, reduce principal, or convert debt to equity. These transactions happen entirely outside the court system.
In-bankruptcy restructuring occurs under the supervision of a federal bankruptcy court, typically through Chapter 11 proceedings. The court provides tools such as the automatic stay (which halts creditor actions) and cramdown provisions (which require dissenting creditors to accept a plan).
The migration from courtroom to conference room is not coincidental. It reflects the brutal economics of formal bankruptcy and the increased flexibility built into modern credit agreements.
The Current Restructuring Landscape
The 2024-2025 period has been defined by what restructuring professionals call "extend and pretend."
Faced with a massive maturity wall of debt coming due in 2025 and 2026, borrowers and lenders engaged in an unprecedented wave of amend-and-extend transactions totaling $226 billion in 2024 alone.
These transactions successfully flattened the immediate crisis.
While the total corporate maturity wall remains in the trillions, the riskiest segment saw the most dramatic shifts. Speculative-grade debt maturing in 2025 was pushed out, leaving just $13.4 billion of these high-risk obligations outstanding. Similarly, the 2026 distressed maturity wall was reduced by 75% to $44 billion.
But this success is stratified by credit quality. At the same time, investment-grade and stronger speculative-grade borrowers found receptive markets; the weakest credits faced closed doors. Companies rated CCC or lower saw their 2026 maturities reduced by only 19%, creating a toxic concentration of distressed debt in the near term.
The result is a bifurcated market. Strong borrowers have a runway. Weak borrowers face a hard wall.
Pre-Bankruptcy Restructuring Mechanisms
When a company faces covenant breaches, liquidity constraints, or an approaching maturity date it cannot refinance at reasonable terms, several pre-bankruptcy options exist.
Forbearance Agreements
A forbearance agreement is a temporary truce. The lender agrees not to exercise its default remedies for a specified period (typically 30-90 days) while the borrower develops a longer-term solution.
Lenders rarely grant forbearance for free. In exchange, they typically require enhanced reporting, restrictions on capital expenditures, additional collateral, or increased fees. Forbearance buys time but does not solve structural problems.
Amend-and-Extend Transactions
The amend-and-extend (A&E) has become the dominant restructuring tool of the 2024-2025 cycle. In a typical A&E, the borrower requests a maturity extension of 2-3 years in exchange for an increased interest rate spread and upfront consent fees.
The data on A&E effectiveness is mixed. According to S&P Global, 63% of companies that completed liability management exercises between mid-2017 and August 2024 avoided bankruptcy. However, only 14% maintained credit ratings above CCC+ and avoided subsequent default.
This suggests A&E transactions are successful at delaying bankruptcy but often fail to address fundamental business model issues. For lenders, the calculus is straightforward: a 200-basis-point spread increase and extended runway is preferable to forcing a borrower into Chapter 11, where professional fees will consume 1-2% of asset value, and recovery becomes uncertain.
Debt Modification vs. Debt-for-Equity Conversion
When a company is over-leveraged but operationally viable, there are two structural paths: modifying the debt or converting it to equity.
Debt modification involves reducing interest rates, extending maturities, allowing payment-in-kind (PIK) interest, or adjusting financial covenants. These modifications preserve the debt relationship but on more sustainable terms.
Debt-for-equity conversion (equitization) involves swapping debt for ownership stakes. Lenders become shareholders, the balance sheet is deleveraged, and the company avoids a potentially fatal tax event by taking advantage of the insolvency exception under Section 108 of the Internal Revenue Code.
The choice between modification and equitization depends on leverage levels, enterprise value, tax considerations, and lender appetite for equity ownership. (For a detailed analysis of these strategies, see our article on debt modification vs. extinguishment.)
Out-of-Court Workouts
A comprehensive out-of-court workout restructures the entire capital structure through consensual negotiation. This can involve debt haircuts, maturity extensions, collateral releases, and governance changes, all documented in a private restructuring agreement.
The advantage is speed and cost. Out-of-court restructurings typically take 3-12 months and avoid the significant professional fees of Chapter 11 (which average 4-5% of assets for small businesses and 1-2% for larger companies).
The limitation is unanimity. Without bankruptcy court powers, a single holdout creditor can derail the entire transaction. This has driven the rise of "liability management exercises," where the majority of lenders coerce holdouts through aggressive tactics, but these structures carry significant legal and reputational risks.
When Secured Lenders Take Enforcement Action
Not all distressed situations involve cooperative restructuring. When negotiations fail or the borrower's business deteriorates beyond salvage, secured lenders turn to enforcement remedies.
Under the Uniform Commercial Code (UCC) Article 9, secured lenders with properly perfected security interests in personal property collateral (inventory, equipment, accounts receivable, intellectual property) can foreclose on that collateral in as little as 30-40 days. This is dramatically faster than the 247-day average for a Subchapter V Chapter 11 case or the 339-day average for traditional Chapter 11.
The speed of UCC foreclosure makes it an attractive alternative to bankruptcy for asset-based lenders, particularly when the borrower's enterprise value has collapsed, and continued operations would only destroy remaining collateral value.
However, UCC foreclosure has limitations. The sale must be "commercially reasonable," proper notice must be given to the debtor and junior creditors, and the secured lender's recovery is capped at the value of its specific collateral. If the business has value as a going concern that exceeds the liquidation value of individual assets, a Chapter 11 sale under Section 363 may yield better results for all stakeholders.
(For a comprehensive examination of UCC foreclosure remedies and lender/borrower considerations, see our detailed analysis here.)
Industry-Specific Restructuring Realities
Debt restructuring strategies are not one-size-fits-all. Industry-specific constraints create unique challenges and opportunities.
Cannabis: The Federal Bankruptcy Exclusion
The cannabis industry faces a restructuring landscape unlike any other sector. Because marijuana remains a Schedule I controlled substance under federal law, cannabis companies cannot access federal bankruptcy protection.
The implications are severe. Cannabis operators facing the industry's $6 billion debt maturity wall have no access to the automatic stay, cramdown provisions, or discharge mechanisms available to every other American business. Instead, they must rely on state-court receiverships, out-of-court workouts, or UCC foreclosure by secured lenders.
The data reflects this crisis. Only 27% of cannabis operators reported profitability in 2024, down from 42% in 2022. Delinquent payments across the industry exceeded $3.8 billion in 2023 and are projected to surpass $4.2 billion in 2024.
For secured lenders to cannabis companies, UCC foreclosure has become the primary tool. However, cannabis collateral presents unique challenges. Inventory is "almost worthless" in liquidation due to regulatory restrictions on transfer, and licenses are typically non-transferable without lengthy state approval processes.
Commercial Finance and Fintech: The High-Velocity Default Environment
Merchant cash advance (MCA) providers and alternative lenders face default rates far higher than those in traditional banking. MCA default rates range from 10 to 30%, compared to just 1.13% for conventional small business loans.
This high-default environment is driven by several factors: the targeting of subprime borrowers, the phenomenon of "stacking" (where merchants take multiple simultaneous advances), and the inherent volatility of small business cash flows.
For MCA platforms relying on asset-backed securitization to fund originations, rising defaults create a vicious cycle. As delinquencies breach structural thresholds in securitization deals, equity tranches are wiped out, cutting off cash flow back to the platform. This funding squeeze forces platforms to curtail lending, leading to revenue declines that trigger their own debt covenants.
The restructuring strategy for these platforms often involves distressed M&A rather than traditional debt workouts, as acquirers seek technology and servicing infrastructure rather than the loan books themselves.
Decision Framework: When to Pursue Each Path
The choice between restructuring strategies depends on multiple factors:
For Business Owners:
Pursue forbearance or A&E when the business is operationally sound but facing temporary liquidity pressure or an imminent maturity that can be extended.
Consider a debt-for-equity conversion when leverage is unsustainable (typically above 8x Debt/EBITDA) and the business has long-term viability. Be mindful of the dilution to existing equity holders.
Evaluate Chapter 11 when creditors are hostile, multiple classes of debt exist with conflicting interests, or the automatic stay is needed to prevent piecemeal asset seizures.
For Lenders:
Out-of-court modifications are optimal when the borrower is cooperative, the loan is performing (even if stressed), and you believe in the business's long-term recovery.
Coercive liability management exercises may maximize near-term recovery but carry reputational and legal risks. Minority lenders are increasingly organizing "cooperation agreements" to block these tactics.
UCC foreclosure is appropriate when enterprise value has deteriorated, the collateral is readily marketable, and continued operations would only destroy remaining value.
For Board Members:
Once a company enters the "zone of insolvency" (where liabilities exceed assets), fiduciary duties shift from shareholders to creditors. Directors must prioritize creditor recovery over equity preservation.
Engaging restructuring counsel early, before covenant defaults cascade into cross-defaults, dramatically improves optionality. By the time multiple lenders have declared defaults and begun enforcement actions, negotiating leverage is often lost.
The Importance of Early Intervention
The most critical variable in restructuring outcomes is timing. Companies that engage restructuring professionals at the first sign of covenant pressure have far more options than those who wait until liquidity is exhausted.
Early intervention allows for:
Proactive lender communication before trust erodes
Development of credible business plans and projections
Identification of non-core assets that can be monetized
Exploration of rescue financing or DIP facilities
Strategic positioning for either an out-of-court deal or a prepackaged Chapter 11
Recovery rates support this conclusion. According to Moody's data, secured lenders in out-of-court restructurings achieved average recoveries of 81.3%, compared to significantly lower recovery rates in contentious bankruptcy proceedings.
The restructuring landscape of 2025 demands sophisticated navigation. The tools are powerful, but they require early deployment, strategic judgment, and specialized expertise.
Sources
S&P Global Market Intelligence - 2024 Corporate Bankruptcy Filings: https://www.marketplace.org/story/2025/01/09/2024-was-a-record-year-for-bankruptcies-why
PitchBook LCD - Amend-and-Extend Transaction Volume and Maturity Wall Analysis: https://pitchbook.com/news/articles/riskier-loan-issuers-push-back-maturity-wall-via-amend-and-extend-deals
S&P Global LossStats - Out-of-Court Restructuring Trends and Recovery Rates: https://pitchbook.com/news/articles/out-of-court-restructurings-lift-leveraged-loan-recovery-rates
CFO.com - Liability Management Exercise Success Rates: https://www.cfo.com/news/liability-management-exercises-a-bridge-to-stability-or-a-costly-detour-to/741396/
Boston College/BYU/UConn - "Can Small Businesses Survive Chapter 11?" Academic Study: https://finance-business.media.uconn.edu/wp-content/uploads/sites/723/2024/03/Xiang-Zheng-Paper-1.pdf
Bloomberg Law - Chapter 11 Professional Fees Analysis: https://news.bloomberglaw.com/bankruptcy-law/what-does-chapter-11-really-cost
Akin Gump Strauss Hauer & Feld - "Demystifying the Out-of-Court Foreclosure Process": https://www.akingump.com/a/web/kGrM623jgxuH3pTVLk2USd/9p3D74/uccforeclosures_2024-pdf-v5.pdf
Moody's Investors Service - Creditor Recovery Rate Studies: https://www.moodys.com/sites/products/defaultresearch/2002300000424883.pdf
Blank Rome LLP / National Law Review - Cannabis Industry Debt Maturity Wall: https://natlawreview.com/article/cannabis-industrys-6-billion-debt-wall
Boston Globe - Cannabis Industry Profitability and Distress: https://www.bostonglobe.com/2025/02/11/business/cannabis-industry-debt-bankruptcy-help/
Whitney Economics - Cannabis Delinquent Payments: https://www.prnewswire.com/news-releases/cash-starved-cannabis-operators-topped-3-8-billion-in-delinquent-payments-in-2023--302104100.html
DailyFunder - Merchant Cash Advance Default Rate Analysis: https://dailyfunder.com/showthread.php/18236-Merchant-Cash-Advance-Company-Default-Rate
The U.S. corporate debt restructuring market has undergone a fundamental transformation over the past 18 months.
In 2024 alone, 694 companies filed for bankruptcy, the highest annual figure since 2010.
Yet beneath these headline numbers lies a more significant shift: 85% of corporate defaults are now resolved through out-of-court restructurings, compared to just 28% historically.
For business owners, lenders, and board members navigating financial distress in 2025, understanding debt restructuring is no longer an academic exercise. It's a strategic imperative.
The playbook has changed, the tools have evolved, and the stakes have never been higher.
What Debt Restructuring Actually Means
Debt restructuring is the process of renegotiating the terms of existing debt obligations to avoid insolvency or improve a company's financial position. This can occur either before or during formal bankruptcy proceedings.
The critical distinction is not definitional but strategic. Modern debt restructuring exists on a spectrum:
Pre-bankruptcy restructuring involves consensual negotiations between borrowers and lenders to modify loan terms, extend maturities, reduce principal, or convert debt to equity. These transactions happen entirely outside the court system.
In-bankruptcy restructuring occurs under the supervision of a federal bankruptcy court, typically through Chapter 11 proceedings. The court provides tools such as the automatic stay (which halts creditor actions) and cramdown provisions (which require dissenting creditors to accept a plan).
The migration from courtroom to conference room is not coincidental. It reflects the brutal economics of formal bankruptcy and the increased flexibility built into modern credit agreements.
The Current Restructuring Landscape
The 2024-2025 period has been defined by what restructuring professionals call "extend and pretend."
Faced with a massive maturity wall of debt coming due in 2025 and 2026, borrowers and lenders engaged in an unprecedented wave of amend-and-extend transactions totaling $226 billion in 2024 alone.
These transactions successfully flattened the immediate crisis.
While the total corporate maturity wall remains in the trillions, the riskiest segment saw the most dramatic shifts. Speculative-grade debt maturing in 2025 was pushed out, leaving just $13.4 billion of these high-risk obligations outstanding. Similarly, the 2026 distressed maturity wall was reduced by 75% to $44 billion.
But this success is stratified by credit quality. At the same time, investment-grade and stronger speculative-grade borrowers found receptive markets; the weakest credits faced closed doors. Companies rated CCC or lower saw their 2026 maturities reduced by only 19%, creating a toxic concentration of distressed debt in the near term.
The result is a bifurcated market. Strong borrowers have a runway. Weak borrowers face a hard wall.
Pre-Bankruptcy Restructuring Mechanisms
When a company faces covenant breaches, liquidity constraints, or an approaching maturity date it cannot refinance at reasonable terms, several pre-bankruptcy options exist.
Forbearance Agreements
A forbearance agreement is a temporary truce. The lender agrees not to exercise its default remedies for a specified period (typically 30-90 days) while the borrower develops a longer-term solution.
Lenders rarely grant forbearance for free. In exchange, they typically require enhanced reporting, restrictions on capital expenditures, additional collateral, or increased fees. Forbearance buys time but does not solve structural problems.
Amend-and-Extend Transactions
The amend-and-extend (A&E) has become the dominant restructuring tool of the 2024-2025 cycle. In a typical A&E, the borrower requests a maturity extension of 2-3 years in exchange for an increased interest rate spread and upfront consent fees.
The data on A&E effectiveness is mixed. According to S&P Global, 63% of companies that completed liability management exercises between mid-2017 and August 2024 avoided bankruptcy. However, only 14% maintained credit ratings above CCC+ and avoided subsequent default.
This suggests A&E transactions are successful at delaying bankruptcy but often fail to address fundamental business model issues. For lenders, the calculus is straightforward: a 200-basis-point spread increase and extended runway is preferable to forcing a borrower into Chapter 11, where professional fees will consume 1-2% of asset value, and recovery becomes uncertain.
Debt Modification vs. Debt-for-Equity Conversion
When a company is over-leveraged but operationally viable, there are two structural paths: modifying the debt or converting it to equity.
Debt modification involves reducing interest rates, extending maturities, allowing payment-in-kind (PIK) interest, or adjusting financial covenants. These modifications preserve the debt relationship but on more sustainable terms.
Debt-for-equity conversion (equitization) involves swapping debt for ownership stakes. Lenders become shareholders, the balance sheet is deleveraged, and the company avoids a potentially fatal tax event by taking advantage of the insolvency exception under Section 108 of the Internal Revenue Code.
The choice between modification and equitization depends on leverage levels, enterprise value, tax considerations, and lender appetite for equity ownership. (For a detailed analysis of these strategies, see our article on debt modification vs. extinguishment.)
Out-of-Court Workouts
A comprehensive out-of-court workout restructures the entire capital structure through consensual negotiation. This can involve debt haircuts, maturity extensions, collateral releases, and governance changes, all documented in a private restructuring agreement.
The advantage is speed and cost. Out-of-court restructurings typically take 3-12 months and avoid the significant professional fees of Chapter 11 (which average 4-5% of assets for small businesses and 1-2% for larger companies).
The limitation is unanimity. Without bankruptcy court powers, a single holdout creditor can derail the entire transaction. This has driven the rise of "liability management exercises," where the majority of lenders coerce holdouts through aggressive tactics, but these structures carry significant legal and reputational risks.
When Secured Lenders Take Enforcement Action
Not all distressed situations involve cooperative restructuring. When negotiations fail or the borrower's business deteriorates beyond salvage, secured lenders turn to enforcement remedies.
Under the Uniform Commercial Code (UCC) Article 9, secured lenders with properly perfected security interests in personal property collateral (inventory, equipment, accounts receivable, intellectual property) can foreclose on that collateral in as little as 30-40 days. This is dramatically faster than the 247-day average for a Subchapter V Chapter 11 case or the 339-day average for traditional Chapter 11.
The speed of UCC foreclosure makes it an attractive alternative to bankruptcy for asset-based lenders, particularly when the borrower's enterprise value has collapsed, and continued operations would only destroy remaining collateral value.
However, UCC foreclosure has limitations. The sale must be "commercially reasonable," proper notice must be given to the debtor and junior creditors, and the secured lender's recovery is capped at the value of its specific collateral. If the business has value as a going concern that exceeds the liquidation value of individual assets, a Chapter 11 sale under Section 363 may yield better results for all stakeholders.
(For a comprehensive examination of UCC foreclosure remedies and lender/borrower considerations, see our detailed analysis here.)
Industry-Specific Restructuring Realities
Debt restructuring strategies are not one-size-fits-all. Industry-specific constraints create unique challenges and opportunities.
Cannabis: The Federal Bankruptcy Exclusion
The cannabis industry faces a restructuring landscape unlike any other sector. Because marijuana remains a Schedule I controlled substance under federal law, cannabis companies cannot access federal bankruptcy protection.
The implications are severe. Cannabis operators facing the industry's $6 billion debt maturity wall have no access to the automatic stay, cramdown provisions, or discharge mechanisms available to every other American business. Instead, they must rely on state-court receiverships, out-of-court workouts, or UCC foreclosure by secured lenders.
The data reflects this crisis. Only 27% of cannabis operators reported profitability in 2024, down from 42% in 2022. Delinquent payments across the industry exceeded $3.8 billion in 2023 and are projected to surpass $4.2 billion in 2024.
For secured lenders to cannabis companies, UCC foreclosure has become the primary tool. However, cannabis collateral presents unique challenges. Inventory is "almost worthless" in liquidation due to regulatory restrictions on transfer, and licenses are typically non-transferable without lengthy state approval processes.
Commercial Finance and Fintech: The High-Velocity Default Environment
Merchant cash advance (MCA) providers and alternative lenders face default rates far higher than those in traditional banking. MCA default rates range from 10 to 30%, compared to just 1.13% for conventional small business loans.
This high-default environment is driven by several factors: the targeting of subprime borrowers, the phenomenon of "stacking" (where merchants take multiple simultaneous advances), and the inherent volatility of small business cash flows.
For MCA platforms relying on asset-backed securitization to fund originations, rising defaults create a vicious cycle. As delinquencies breach structural thresholds in securitization deals, equity tranches are wiped out, cutting off cash flow back to the platform. This funding squeeze forces platforms to curtail lending, leading to revenue declines that trigger their own debt covenants.
The restructuring strategy for these platforms often involves distressed M&A rather than traditional debt workouts, as acquirers seek technology and servicing infrastructure rather than the loan books themselves.
Decision Framework: When to Pursue Each Path
The choice between restructuring strategies depends on multiple factors:
For Business Owners:
Pursue forbearance or A&E when the business is operationally sound but facing temporary liquidity pressure or an imminent maturity that can be extended.
Consider a debt-for-equity conversion when leverage is unsustainable (typically above 8x Debt/EBITDA) and the business has long-term viability. Be mindful of the dilution to existing equity holders.
Evaluate Chapter 11 when creditors are hostile, multiple classes of debt exist with conflicting interests, or the automatic stay is needed to prevent piecemeal asset seizures.
For Lenders:
Out-of-court modifications are optimal when the borrower is cooperative, the loan is performing (even if stressed), and you believe in the business's long-term recovery.
Coercive liability management exercises may maximize near-term recovery but carry reputational and legal risks. Minority lenders are increasingly organizing "cooperation agreements" to block these tactics.
UCC foreclosure is appropriate when enterprise value has deteriorated, the collateral is readily marketable, and continued operations would only destroy remaining value.
For Board Members:
Once a company enters the "zone of insolvency" (where liabilities exceed assets), fiduciary duties shift from shareholders to creditors. Directors must prioritize creditor recovery over equity preservation.
Engaging restructuring counsel early, before covenant defaults cascade into cross-defaults, dramatically improves optionality. By the time multiple lenders have declared defaults and begun enforcement actions, negotiating leverage is often lost.
The Importance of Early Intervention
The most critical variable in restructuring outcomes is timing. Companies that engage restructuring professionals at the first sign of covenant pressure have far more options than those who wait until liquidity is exhausted.
Early intervention allows for:
Proactive lender communication before trust erodes
Development of credible business plans and projections
Identification of non-core assets that can be monetized
Exploration of rescue financing or DIP facilities
Strategic positioning for either an out-of-court deal or a prepackaged Chapter 11
Recovery rates support this conclusion. According to Moody's data, secured lenders in out-of-court restructurings achieved average recoveries of 81.3%, compared to significantly lower recovery rates in contentious bankruptcy proceedings.
The restructuring landscape of 2025 demands sophisticated navigation. The tools are powerful, but they require early deployment, strategic judgment, and specialized expertise.
Sources
S&P Global Market Intelligence - 2024 Corporate Bankruptcy Filings: https://www.marketplace.org/story/2025/01/09/2024-was-a-record-year-for-bankruptcies-why
PitchBook LCD - Amend-and-Extend Transaction Volume and Maturity Wall Analysis: https://pitchbook.com/news/articles/riskier-loan-issuers-push-back-maturity-wall-via-amend-and-extend-deals
S&P Global LossStats - Out-of-Court Restructuring Trends and Recovery Rates: https://pitchbook.com/news/articles/out-of-court-restructurings-lift-leveraged-loan-recovery-rates
CFO.com - Liability Management Exercise Success Rates: https://www.cfo.com/news/liability-management-exercises-a-bridge-to-stability-or-a-costly-detour-to/741396/
Boston College/BYU/UConn - "Can Small Businesses Survive Chapter 11?" Academic Study: https://finance-business.media.uconn.edu/wp-content/uploads/sites/723/2024/03/Xiang-Zheng-Paper-1.pdf
Bloomberg Law - Chapter 11 Professional Fees Analysis: https://news.bloomberglaw.com/bankruptcy-law/what-does-chapter-11-really-cost
Akin Gump Strauss Hauer & Feld - "Demystifying the Out-of-Court Foreclosure Process": https://www.akingump.com/a/web/kGrM623jgxuH3pTVLk2USd/9p3D74/uccforeclosures_2024-pdf-v5.pdf
Moody's Investors Service - Creditor Recovery Rate Studies: https://www.moodys.com/sites/products/defaultresearch/2002300000424883.pdf
Blank Rome LLP / National Law Review - Cannabis Industry Debt Maturity Wall: https://natlawreview.com/article/cannabis-industrys-6-billion-debt-wall
Boston Globe - Cannabis Industry Profitability and Distress: https://www.bostonglobe.com/2025/02/11/business/cannabis-industry-debt-bankruptcy-help/
Whitney Economics - Cannabis Delinquent Payments: https://www.prnewswire.com/news-releases/cash-starved-cannabis-operators-topped-3-8-billion-in-delinquent-payments-in-2023--302104100.html
DailyFunder - Merchant Cash Advance Default Rate Analysis: https://dailyfunder.com/showthread.php/18236-Merchant-Cash-Advance-Company-Default-Rate
Conclusion
The corporate debt restructuring landscape has fundamentally shifted, with 85% of defaults now resolved through out-of-court mechanisms like forbearance agreements and amend-and-extend (A&E) transactions, prioritizing speed and cost avoidance over formal Chapter 11 bankruptcy. While A&E deals have successfully delayed a massive debt maturity crisis for stronger borrowers, the weakest credits face a "hard wall" of concentrated distress. For business owners, the choice of strategy—from debt modification to debt-for-equity conversion—depends on leverage and viability, but the document stresses that the most critical variable for success is early intervention, as companies that proactively engage counsel achieve significantly higher recovery rates than those who wait until liquidity is exhausted.
Brightpoint Team
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