The Distressed Debt Report - January 7, 2006

Distressed debt investors are raising hundreds of millions of dollars in expectation of more opportunities in 2006, when rising interest rates and natural resource prices could force borrowers to default on loans. Some expect distressed debt values to take a step down, however, before the opportunities present themselves. Full Story

Second lien financings have become remarkably popular in the debt financing market over the last couple of years. New issues of second lien debt grew to about $10 billion in the first half of 2005 from $12.2 billion in 2004 and only $3.2 billion in 2003, according to Standard & Poor’s. Full Story

A new middle market lender, operated by former top executives of BNP Paribas, is preparing to raise about $400 million in its first of a series of collateralized loan obligations. The new CLO from Global Leveraged Capital in New York will kick off what analysts expect to be a torrid pace for new issues in 2006. Full Story

• CalPERS Accelerates Placement of $200M Clean Tech Fund
• Cantor Fitzgerald to Trade Middle Market Loans
• Atoll Starting $100M Debt Fund
• Gael Launches $100M SBIC for California's Central Valley
• Recovery Unlikely for FLYi's Subordinated Lenders
• Atkins' Reorganization Gets Final Court Approval
• Hedge Manager Magnum Starts First Mezzanine Fund
• BB&T Raising $160M Mezzanine Fund
• Hirings and Firings

Growth in lending to middle market companies slowed last year as yields on loans to small companies declined. An annual survey by Reuter’s Loan Pricing Corp. found that the volume of new loans to companies with less than $500 million in annual revenue hit $183.1 billion in 2005, up 9% from 2004 levels. Last year’s loan volume was 71% higher than 2003’s issuance of $107 billion. Full Story