Executive Summary

• This “special situations” report is organized into five parts and outlines our expectations for defaults, sector themes, and legal/covenant trends in 2026, along with a review of notable defaults, liability management, litigation, and bankruptcy events from 2025.
• Part I discusses our 2026 strategy outlook and examines the mixed performance of leveraged finance markets in 2025, with underperformance in lower-rated segments and ongoing risks from policy volatility and increased deal activity.
• Part II highlights key sector themes, presents a curated list of special situations credits of market interest, and concludes with LevFin Insights’ “U.S. Restructuring Runway Report” on distressed issuers likely to face near-term restructuring catalysts.
• Part III provides a comprehensive roundup of 2025 liability management transactions and discusses judicial developments, market adaptations, and emerging themes affecting creditor dynamics as issuers prepare for further headwinds going into 2026.
• Part IV examines major litigation trends from 2025, including creditor-on-creditor conflicts, antitrust and cooperation agreement disputes, and fraudulent transfer litigation impacting market outcomes.
• Part V discusses our new Post Petition bankruptcy product, significant chapter 11 cases from 2025 not otherwise covered, and concludes with DIP financing trends, advisor mandates, and case outcomes supported by two data-rich appendices.