Where creditors are few and cooperative, restructuring outside a formal proceeding is faster and preserves more value.

Typical structures. Maturity extensions; interest rate or payment reductions; payment-in-kind toggles; principal writedown in exchange for equity or warrants; new money with priority; and exchange offers for bond debt.

The holdout problem. Amendments to core terms of a credit agreement — money terms, maturity, pro rata sharing — generally require unanimous lender consent, so a single holder can block. Exchange offers face the same problem, and the response is often exit consents stripping covenants from non-participating holders, which has been litigated repeatedly.

Intercreditor issues. Junior creditors’ consent may be required, and subordination agreements govern whether they can block or must stand aside.

Fraudulent transfer risk where value moves among affiliates or where new liens are granted for old debt while insolvent.

Directors’ duties to creditors once insolvency approaches, and the documentation of the process.

Prepackaged and prearranged cases as a backstop: negotiating the plan out of court and using a short proceeding to bind holdouts.

Tax. Cancellation of indebtedness income, and the exceptions for insolvency and for certain modifications.