Out-of-court restructurings, or LMEs, introduce uncertainty into a company's capital structure. This forces the market to apply an additional 10-20 point discount to the trading price of the company's loans, creating a significant alpha-generating opportunity for specialized investors who can accurately underwrite the LME process.

A sum-of-the-parts analysis suggests Alexander's ($ALX) is worth ~$340/share versus its ~$240 price. The valuation is anchored by its Bloomberg Tower asset and cash balance. This implies investors are essentially getting the company's Queens apartment building, shopping center, and a prime development site for free.

Concerns about Vornado controlling Alexander's ($ALX) are mitigated by CEO Steve Roth's incentives. Key executives own ~46% of ALX versus ~10% of Vornado. Roth's personal dividend income from his ALX stake ($12M/year) dwarfs his compensation from the company, suggesting he is highly motivated to maximize ALX's value.

A credit rating is just a starting point. Crossmark's Victoria Fernandez uses an Alcoa example to show how their independent balance sheet analysis revealed the company could still service its debt, allowing them to hold a downgraded bond to maturity and avoid realizing a significant loss.

Aggressive debt restructuring, or 'liability management,' is more common in public credit markets due to weaker documentation. Private credit documents typically have stronger covenant protections that prevent borrowers from layering new debt ahead of existing lenders or stripping collateral, reducing this specific risk.

Liability Management Exercises (LMEs) that extended debt maturities a few years ago are proving to be temporary fixes, not cures. Many of these same companies are returning for "LME 2.0" because fundamental business issues—like weak consumer demand or high input costs—were never resolved, making the initial "kick the can" strategy ineffective.

After enduring a brutal multi-year short-seller campaign, Fairfax concluded that a fortress balance sheet is the ultimate defense. They now hold billions in cash and untapped credit lines, not just for operational safety, but specifically to make the company an unattractive target for future hedge fund attacks.

Alexander's ($ALX) restructured a $300M loan on its retail condo, buying back a portion for 44 cents on the dollar. The lender took a 56% haircut but retained a subordinated "hope piece." This shrewd move saved ALX $17.2M in annual interest expense and preserved strategic control of the asset.

Alexander's ($ALX) moved tenants from its Rego 1 property to the adjacent Rego 2. This move strengthened Rego 2 by increasing occupancy, but more importantly, it eliminated 330,000 sq ft of competing local retail space. This strategic consolidation enhanced the value of the entire location and freed up Rego 1 for a lucrative sale as a development site.