This blog highlights key takeaways from the June 2025 American Bankruptcy Institute (ABI) webinar, hosted in partnership with SC&H Capital. For the full depth of discussion, we encourage you to watch the full recording.
Key Topics Discussed
What triggers a sale of collateral (defaults, liquidity crunches)
Common paths forward: consensual equity turnover, UCC foreclosures, bankruptcy
Tax implications and the importance of early analysis
Sponsor cooperation and how it shapes outcomes
Proxy exercises and board replacements
Structuring acquisition vehicles and governance rights
Winding down the original company and managing successor liability
What Happens When Private Credit Lenders Sell Collateral
When a deal goes sideways, lenders must navigate a complex mix of strategic, legal, and relational dynamics. One of the key takeaways from the discussion? Taking ownership is rarely the first choice—it’s the fallback.
Most lenders prefer to start with a refinancing or sale. But if market conditions aren’t favorable or the business needs time to stabilize, they may choose to “take the keys” and hold onto the asset until recovery is possible.
Tax analysis plays a huge role in shaping these decisions. From cancellation of debt income to group deconsolidation, the tax implications can be deal-defining. The panelists stressed the importance of launching this analysis early—ideally before any restructuring begins.
Sponsor cooperation is another major factor. In the private credit world, relationships matter. Lenders and sponsors often work together across multiple deals, which encourages more collaborative problem-solving. That said, when sponsors resist, lenders have tools—like proxy exercises—to replace boards and move forward.
In connection with taking control, lenders need to set up acquisition vehicles, negotiate governance rights, and figure out what to do with the old company. Whether it’s a formal dissolution, an assignment for the benefit of creditors (ABC), or simply letting the entity fade out, the goal is to minimize risk and avoid unnecessary litigation.
The webinar made it clear: these situations are complex and require a multidisciplinary team. Restructuring lawyers, M&A experts, tax advisors, and litigation counsel all play a role in navigating the process.
Speakers
Moderator: Michael Fixler, Managing Director, SC&H Capital
David Hillman, Global Co-Chair of the Restructuring Group and Co-Head of the Private Credit Restructuring Group, Proskauer LLP
Matthew Warren, Partner, Financial Restructuring Group, Paul Hastings LLP
About American Bankruptcy Institute
The American Bankruptcy Institute provides congressional leaders and the public with reporting and analysis of bankruptcy regulations, laws, and trends. With 18 different committees and more than 12,000 members in multi-disciplinary roles, ABI provides educational conferences, networking opportunities, and other events to strengthen relationships in the industry and develop leadership roles. To learn more visit www.abi.org.
Want More? Don’t Miss the Next Two Webinars in the Series
September 10 – Private Credit Loan Refinancing: Considerations for Borrowers and New Lenders
November 13 – Independent Directors for Private Credit Lender Borrowers
