A massive quarterly jump in "lien subordination" protections (to 84% of deals) signals a strategic shift among lenders. Instead of focusing on terms that prevent default, they are obsessed with securing their place in the payment line during bankruptcy, suggesting they view distress as increasingly likely.

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.

Co-founding Scour with Travis Kalanick taught Jason Droege that business has no fixed playbook. From wild VC negotiations to legal battles, he learned that if you can imagine a path and align incentives, you can negotiate your way through almost any obstacle.

Ather faced three successive valuation cuts (40%, 50%, 65%) that would kill most startups. They retained their team by being radically transparent about finances, asking for voluntary pay cuts, and building trust by later rewarding those sacrifices with bonuses and equity at the lower valuations.

In a distressed scenario, simply asserting seniority as a junior capital provider is ineffective. You cannot force the majority owner and management team, whom you've just told are worthless, to run the business for your benefit. The only viable path is to renegotiate and realign incentives for all parties to work towards a recovery together.

Aggressive Liability Management Exercises (LMEs), common in the US, are rarer in Europe. This isn't due to a gentler culture but stricter laws where board directors can face criminal charges for insolvency. This incentivizes collaborative restructuring over contentious, US-style creditor battles.

After quitting a job to avoid wage garnishment, a guest found success by being completely honest and vulnerable with the law firm collecting his debt. Instead of ignoring them, he explained his situation, which resulted in a negotiated payment plan with zero interest—a far better outcome than evasion.

Founder Sean Nelson reframes Chapter 11 bankruptcy not as a failure, but as an invaluable, real-world education. It provided a raw understanding of contracts, leases, and high-stakes decision-making that is impossible to learn academically. This crucible experience ultimately made him a more resilient and knowledgeable leader.

When considering debt, the most critical due diligence is not on deal terms but on the lender's character. Investigate how they have treated portfolio companies during challenging times. Partnering with a lender who will "blow you up" at the first sign of trouble is a catastrophic risk.