The Distressed Debt Report - February 7, 2006

The big carmakers’ troubles and tactics to cope have set up a compelling bet for distressed debt investors. While hundreds of companies that supply the automakers may be put out of business, hundreds or thousands of others will be left with less competition and deeper relationships with their biggest customers. This is why many market players see the auto industry as the most attractive area for distressed debt investment in 2006. Full Story

Rulings Could Make it Harder to Hold Lenders Liable

Two recent court decisions might make it harder for equityholders and unsecured creditors to hold lenders liable for pushing companies into insolvency. In both cases – SubMicron Systems v. KB Mezzanine Fund, et al. and VarTec Telecom v. Rural Telephone Finance, et al. – unsecured creditors failed to convince courts that the lenders’ debt should be treated as equity. If their argument had been accepted, the secured claims would have received lower priority in the bankrupt companies’ reorganizations. That would have given unsecured creditors and equityholders a better chance to collect payouts. Full Story

Nellson Nutraceutical, a leading maker of nutrition bars and weight loss powders, filed for Chapter 11 bankruptcy last month after its first and second lien holders called about $336 million in debt. Nellson, based in Irwindale, Calif., manufactures products sold under brand names including "Bariatrix" and "Proti" and for other companies to sell under their own labels. Full Story

• Florida Capital Co-Founders Launch SBIC
• Allied Brings Senior Lending Capability In-House
• NewStar Expanding
• Golub Raises $300M
• Protocol's Second Lienholders Lose out in Restructuring
• Venture Lending Pioneer Starts New Firm
• Events
• Hirings and Firings

Mezzanine and private equity funds saw returns jump significantly for the year ending Sept. 30 as more funds exited investments in the third quarter, according to a recent market survey by Thomson Venture Economics and the National Venture Capital Association. Full Story