It is common to associate traditional Wall Street law firms, the so-called white-shoe firms , with the polished image of corporate law and mergers and acquisitions . However, as John Oller documents in the book White Shoe and Jeremiah D. Lambert and Geoffrey S. Stewart in The Anointed , the genesis of institutions such as Davis Polk and Sullivan & Cromwell occurred in the litigious environment of 19th-century railroad restructurings.
In 2026, restructuring will regain a central place in global strategy, driven by the expansion of private credit and the need to prevent disputes, promote credit recovery, and address restructuring situations through contractual techniques.
Few people know that the corporate trust indenture — an arrangement that enabled American economic expansion and which, in Brazil, finds an analogue in the debenture issuance deed — was conceived by Francis Lynde Stetson, a restructuring lawyer and partner at what would become Davis Polk.
Stetson did not design this instrument based on abstract theory, but on empirical experience gained from railway reorganizations.
In The Anointed , the authors highlight that Stetson's conception of indenture stemmed from his days in litigation and his frustration in mediating negotiations between creditors. The following excerpt is illustrative:
"Knowing the inherent limitations of litigation and the unpredictability of the courts, Stetson believed that the uncertainties of the judicial system could be overcome if bankers and their lawyers, from the outset , established clear rules and defined legal rights long before any crisis arose."
Reading this in Brazil in 2026, where legal uncertainty persists in insolvency proceedings, the analogy is inevitable. Stetson sought to create a "private bankruptcy code," detailing the conditions for administrators' actions and the rights they could exercise.
Although the idea of a "private code" may seem ambitious for the Brazilian scenario—where contractual minutiae are frequently ignored by the Judiciary—the logic remains valid. Ex ante regulation of issues such as subordination and acceleration events would generate predictability, given that the fundamental problems of restructuring have changed little in a century.
If the convenience of this evolution is evident, why doesn't it occur at the necessary speed? The answer is inertia. In The 3 1/2 Minute Transaction , Mitu Gulati and Robert E. Scott illustrate the problem:
"Boilerplate language in contracts tends to linger long after its origins and purposes have been forgotten. [...] Such was the case with the obscure pari passu clause in sovereign debt contracts [...] Although neither party wanted this [litigious] outcome, the vast majority of contracts subsequently issued demonstrate virtually no attempt to clarify the clause's imprecise language."
Today, given the credit events that have occurred in Brazil since 2023, we have data to identify what needs to be changed. However, most instruments remain in the pre-crisis pattern.
The times demand change. The recent history of restructurings and the growth of private credit, with investors demanding more robust forecasts, indicate that documentation techniques must evolve in parallel with the volume and complexity of operations. Perhaps it's time to invite a restructuring lawyer to the next kick-off meeting for a debenture issuance.
Bernardo Carneiro is a restructuring and insolvency partner at the law firm Lefosse.
