London Capital Solutions and Business Restructuring: What We Saw in 2025 and What to Watch in 2026

The European restructuring landscape in 2025 was defined by the continuing influence of private credit and the escalating “arms race” between parties to implement and counter liability management transactions, along with increasing clarity regarding the standards applied in sanctioning restructuring plans and creative cross-border coordination. 

Looking ahead to 2026, several trends and legal developments are set to shape the market’s approach to distressed capital structures. This article highlights the key themes and practical insights from Ropes & Gray’s ‘London Capital Solutions and Business Restructuring: 2025 Year in Review’.  Please click here for the full report.

Private Credit’s Expanding Role

Private credit has become a driving force in European workouts, shifting the restructuring market towards lender groups prioritising faster, more tailored and creative capital solutions. Private credit lenders tend to adopt a relationship-based approach, showing willingness to grant waivers or short-term resets where a credible path to stability exists.

However, this flexibility brings with it a willingness to enforce rights or take control if needed. The rise of private credit has accelerated restructuring timelines, brought increased variation in documentation, and heightened litigation risk. Early adviser engagement and rigorous planning are crucial for stakeholders facing a distressed or potentially distressed situation.

Developments in Restructuring Plans

Courts in 2025 have made clear that differential allocation of benefits and burdens between creditor classes in restructuring plans must be thoroughly justified. Courts expect meaningful engagement with existing creditors, even those “out of the money”. Planning ahead in light of the scrutiny applied by courts is key to designing an effective restructuring plan. English courts are also becoming an increasingly popular venue for creative cross-border solutions, as seen in Fossil, which put into place the innovative “London two-step”, combining an exchange offer with a part 26A restructuring plan and later Chapter 15 recognition, 

Creditor Coordination

Co-operation agreements are an increasing feature of the European restructuring market to counter US-style liability management transactions. The novelty of co-operation agreements in Europe, as well as emerging antitrust concerns, provide both risk and opportunity. Sponsors and borrowers increasingly are seeking to disrupt creditor coordination with selective incentives or restrictions on communication. 

What to Watch for in 2026

• Restructuring Activity and Sector Stress. A peak in restructuring activity is anticipated in the first half of 2026, with private credit lending becoming more selective. Sectors such as automotive, manufacturing and construction are expected to experience heightened stress.

• Liability Management and Court-Supervised Plans. US-style liability management techniques are now embedded in European practice, with sponsors utilising documentary flexibility and lenders responding with tighter documentary protections and increasing coordination. 

• Evolving Legal Standards. The fairness in the distribution of the benefits and burdens of restructuring plans will increasingly inform decision-making.

• Cross-border innovation. Groundbreaking transactions such as Fossil and the appeal of flexible English restructuring tools will encourage parties to continue to turn to the English courts as a venue for creative cross-border solutions. 

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