Liability management exercises are failing. Recovery rates are plunging. And 99.8% of European companies are SMEs—yet almost all special situations capital chases large-cap deals. Mubashir Mukadam, founder of Blantyre Capital, sees the mispricing clearly.

In the recent ION Influencers Fireside Chat, Mubashir Mukadam, a three-time entrepreneur turned special situations investor, discussed the trends in special situations. Mukadam built the European special sits businesses at York Capital and KKR before launching Blantyre Capital. His journey—from childhood in Malawi (hence the firm’s name) to Wharton, Deutsche Bank’s distressed desk, and now managing a transatlantic special situations platform—is the backdrop for a masterclass in countercyclical investing.

The conversation cut through the noise on liability management, operational value creation, and why the mid-market is the most overlooked opportunity in credit today.

Here’s what investors need to understand.

The Niche: Mid-Market, Massively Underserved

Mukadam opened with a statistic that should startle every LP allocating to private credit:

99.8% of all companies in Europe are SMEs. The US figure is nearly identical.

Yet the vast majority of special situations capital is tied up in large-cap funds.

“We see a paucity of both capital and skill set in the mid-market,” Mukadam said. Blantyre targets €25M–€75M tickets—a zone where banks are retreating, larger funds can’t deploy efficiently, and entrepreneurs are desperate for flexible, intelligent capital.

This isn’t a niche. It’s a structural gap.

The Three-Lever Framework: What Actually Differentiates a Special Sits Investor

Mukadam has invested in over 190 companies across multiple cycles. His framework for value creation is deceptively simple—and rarely executed in full.

Lever 1: Margin of safety.
“If we think something is worth eight, we want to invest at four, five, six.” This means seniority in the capital structure, strong documentation, and jurisdiction-aware underwriting. Buffett’s rule, applied to European bankruptcy regimes.

Lever 2: Creative balance sheet solutions.
Not “amend and extend” theatre. Real structuring that addresses the entrepreneur’s needs, not the investor’s template.

Lever 3: Operational improvement.
“Ten years ago, you could do a financial restructuring and people would attribute value to that. Today, you’ve got to help the business itself turn around.”

Most competitors do one. Fewer do one and two. Very few do all three.

That’s the gap Blantyre occupies.

What “Operational Improvement” Actually Means

Mukadam was careful not to oversell this as a standardised playbook.

“Every company is different,” he said. For some, it’s board augmentation and network access. For others, it’s working capital optimisation. For others still, it’s M&A integration.

The common thread is partnership, not imposition.

“We provide the solution that the entrepreneur wants, not the solution we want,” Mukadam emphasised. “And we do it in a time-sensitive manner.”

This founder-first orientation—unusual in distressed investing—is a direct inheritance from his own entrepreneurial background.

The Transatlantic Pivot: Why Blantyre Moved Into the US

Here’s the irony: 90%+ of Blantyre’s investors are already American. But the firm was known as a European special sits specialist.

So why enter the US market?

Supply-side: Same SME dynamics. Bank retrenchment. Consumer slowdown. Tariff shocks.
Demand-side: Very few mid-market firms with a flexible mandate and operational capabilities.

“You can’t just be a financial engineer today,” Mukadam said. “You’ve got to be able to add value beyond that.”

The firm didn’t acquire its way in. It hired US leaders with the same DNA—the three-lever framework embedded in their muscle memory. Brand recognition among US LPs was already established. The move was logical, not desperate.

The Liability Management Trap

One of Mukadam’s starkest warnings was aimed at the liability management exercises (LMEs) proliferating across Europe.

“The failure rate of those businesses—and the ultimate recovery to stakeholders—is staggeringly high after a few years,” he said.

His example was brutal: one of Europe’s first major LMEs now has its “super senior” debt trading at less than 20 cents on the dollar.

The problem? LMEs and amend-and-extend deals buy time, but they don’t fix operations. Unless paired with genuine turnaround execution, they merely delay a more painful restructuring.

“We fully expect there to be a second and third round,” Mukadam said.

The Macro Backdrop: Where Stress Is Concentrated

Mukadam painted a granular picture of where special situations are emerging—and where they’re heading.

Geography:

• France: Currently the most active special sits market in Europe

• Germany: High energy prices are crushing industrial competitiveness

• UK: 40% of FTSE profit warnings now cite government policy

• Southern Europe: Surprisingly resilient; performing better than expected

Sectors:

• Chemicals: Demand destruction + cost competitiveness crisis

• Consumer: Slowdown is real and spreading

• Infrastructure: Financing costs have soared; the zero-rate hangover is severe

Banks: Regulatory pressure continues to push them away from SME lending. That void is permanent, not cyclical.

Why Special Situations Belong in Every Portfolio

Mukadam made a clean, portfolio-construction argument:

• Private credit and private equity are pro-cyclical. They perform when markets are rising.

• Special situations are counter-cyclical. Not perfectly—companies have challenges in any environment—but dislocation is where the asset class earns its keep.

Risk-return positioning: Between direct lending and private equity. Senior in the capital structure, strong documentation, yet targeting returns well above conventional credit.

This isn’t a niche allocation. It’s a diversifier with asymmetric upside.

And yes—it applies to private wealth channels as much as institutional portfolios.

Rapid-Fire Predictions (2026–2027)

• Exits? Less. DPI pressure persists.

• M&A activity? Buy-and-build > platform deals.

• Recovery ratios? Down. LME failures will crystallise losses.

• Restructuring cases? Up. Second and third rounds incoming.

• Secondaries in credit? Up significantly. “If you can’t sell or refinance, this is the exit.”

• Manager consolidation? More.

• Emerging managers? Absolutely—but only if differentiated. “There’s a big gap in operational capability.”

• Fundraising environment? Tough. Larger funds hoover up capital; LP distributions are scarce. That trend isn’t reversing soon.

What Differentiates a Winning Special Sits Firm

Mukadam was asked: What do you look for when hiring?

“Hunger. And the hunger to learn.”

Pattern recognition comes from seeing hundreds of deals across cycles. But the market evolves. What worked in 2015 won’t work in 2025. Intellectual curiosity—not just experience—is the hedge against obsolescence.

The Bottom Line

Special situations is not a asset class for tourists.

It requires structural seniority, creative structuring, and genuine operational grip—all three, not just one. The mid-market is dramatically underserved, and the wave of liability management exercises will create a second-order opportunity for investors who understand that buying time is not the same as creating value.

Mukadam’s career arc—from immigrant entrepreneur to KKR partner to founder—gives him a perspective most credit investors lack. He’s been on both sides of the table. He knows what founders actually need.

“We don’t provide the solution we want,” he said. “We provide the solution the entrepreneur wants.”

In a market flooded with amend-and-extend wallpaper, that orientation is the real edge.

Key timestamps:

00:07 Introduction to the Fireside Chat
00:43 Mubashir Mukadam’s Background
02:16 Identifying Client Needs as an Entrepreneur
03:24 Understanding Special Situations in the Market
04:54 Investment Strategies and Value Levers
06:27 Defining Creativity in Investment
07:53 Operational Improvement in Business
08:43 Assessing Margin of Safety
10:29 Expanding into the U.S. Market
13:28 Lessons from European Banking Practices
14:41 Comparing Entrepreneurial Behaviors
15:27 The Role of Special Situations in Investment Portfolios
18:01 Market Overview and Future Opportunities
22:37 Macroeconomic Trends and Their Impact
25:42 Future of Fundraising in the Market