Do Restructurings Still Cut Debt? How Amend-and-Extend Took Over | Mike Harmon (Stanford GSB)

An amend-and-extend moves the maturity and leaves the leverage where it was. A debt-for-equity swap cuts the debt and dilutes the equity. The first is routine and the second is rare, and the constraint is not legal - most of the holder base cannot take the equity or does not want it.Josef Pschorn speaks with Mike Harmon of Stanford Graduate School of Business about why out-of-court restructurings extend maturities without reducing debt, and what has to be true before a company actually deleverages.Once a company is worth less than its debt, the equity is an out-of-the-money call option, so shareholders buy time and volatility rather than repair the balance sheetWithout maintenance covenants, creditors cannot force a reduction in debtMost of the holder base does not want equity: CLOs have equity buckets, mutual funds have mandates, and only distressed funds want the positionCreditors are not one actor - a lender hedged with CDS or a par lender who has not marked down has a different payoff from a discount buyerPrivate credit changed the composition of the holder base rather than the law, which is where debt-for-equity swaps are actually getting doneThe US has liability management at one end and Chapter 11 at the other with nothing in between, while the UK, Japan, France and China all run a lighter court-supervised pathMike Harmon: Stanford Graduate School of Business. https://www.linkedin.com/in/mike-harmon-92b130184The Financial Restructuring Tool Set (Columbia University Press): https://cup.columbia.edu/book/the-financial-restructuring-tool-set/9780231216982/Liability Management’s Limited Runway: Corporate Restructuring Today, Mark J. Roe, Vasile Rotaru - Oxford Business Law BlogConnect with Fixed + Floating: LinkedIn https://www.linkedin.com/company/fixed-floating | X https://twitter.com/FixedFloating Fixed + Floating is for informational purposes only. Not investment, legal, or tax advice.Recorded: 24.08.2026#fixedfloating #creditanalysis #liabilitymanagement #distresseddebt #restructuring #privatecredit