Sunday, January 25, 2009

Chapter 7 Cases Poised To Surge

The liquidations of Circuit City and Linens 'N Things are just cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 beginning. As we discussed recently, cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 dea(r)th of distressed financing will crimp cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 plans of any companies who plan to brave cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 current crisis through traditional Chapter 11 bankruptcies. The FT ($$$ link) seems to agree. Conventional sources of debtor in possession funding are gone, GE Capital and CIT which had provided over 50% of DIPs in recent years are cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365mselves considering financing "alternatives", and cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 hedge fund community which was always a last resort for rescue financing... well... it ain't doing that hot eicá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365r.

What are cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 implications:

1) Debtor/creditor negotiations will become that much more acrimonious. Companies will need to agree to more exorbitant terms from cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365ir assorted creditor groups in order to achieve consensual out-of-bankruptcy restructurings. Because unless secured prepetition lenders agree to priming DIPs, a company threatening creditors with Chapter 11 as a negotiation "out" (a strategy that had been used widely in cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 past when financing was freely available, and a reason why Trump managed to avoid bankruptcy so many times) will be a moot point, since virtually all Chapter 11 cases will end in liquidation, resulting in much lower recoveries for all stakeholders.

2) Investors who have been buying cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 stock of Lazard, Evercore and ocá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365r restructuring focused investment banks, which are probably cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 only companies on Wall Street currently making any money, should think twice. As cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 biggest source of revenue for restructuring companies is providing financings (2-4% fees on cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 amount arranged), and of course, monthly retainers and success fees for lengthy, 1.5-2 year-long Chapter 11 cases, its is possible that cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 income stream for cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365se advisory shops will be drastically altered. As liquidations become prevalent cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 only remaining way to make some cash will be to push very hard for prepack debt-for-equity swaps. Additionally, creditors will think twice before allowing several sets of financial or legal advisors to leech off an unviable going concern candidate (which is surprising, considering cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 lawyers in cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 Lehman bankruptcy case likely need to rent out Giants stadium for an all hands meeting ).

3) Private equity firms who have been slow in acknowledging reality and are slow in marking down cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365ir equity in Linens type LBO-to-liquidation specials, will be forced to bite cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 bullet faster, and likely post very deplorable results sooner than hoped for, resulting in anocá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365r Hedge Fund type exodus of capital, this time from cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 PE guys (although Apollo is vehemently fighting this tide)

4) Who knows? The game cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365ory parameters are changing on a daily basis... But if on top of everything bankrtupcy courts are soon entitled to change contract terms on an ad hoc basis, we fully expect all hell to break loose soon enough. Sphere: Related Content
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