The Distressed Debt Report - March 21, 2006

Shorter Term Investors Could Struggle Without Secondary Market

An expected downturn in the credit market could be especially devastating to hedge funds that offer private, unrated second-lien debt. The lack of a secondary market for the new and untested asset class may leave hedge funds especially ill-equipped, some in the market say. Full Story

Executives at Fidelity National Financial and The First American say an imminent downturn in the credit cycle could help foster a potential $1 trillion market for Uniform Commercial Code insurance for asset-based loans. UCC insurance has already found some reception in the last five years, mostly among lenders wanting to protect their secured rights on collateral tied to commercial real estate loans. Now the two companies, the predominant providers of UCC insurance, hope to introduce it to banks, hedge funds, private equity sponsors, and legal representatives in the 95% of the asset-based lending market not using the product in connection with real estate transactions. Full Story

Departing Execs Land at CIT, Morgan Stanley and New Ventures

A stream of lenders from GE Commercial Finance has left the company in recent months to start new ventures and lead expansions of the finance arms of competitors including Morgan Stanley and CIT Group. Full Story

• Granite Hires Houlihan for Advice on Capital Structure
• Bear Stearns Arranges $185M Refi for New World Restaurant
• KKR Hedge Fund to Help Lending Unit Chase Bigger Deals
• Lender Acorn Capital Sues Brokerage Wedbush Morgan
• Hirings & Firings

There were at least six private placements that included mezzanine or subordinated debt publicly announced or reported from Feb. 16 through March 15. The value of those transactions totaled more than $119 million, figures from Standard & Poor’s Capital IQ data service show. Cadence Pharmaceuticals received $60.8 million in venture capital that includes $7 million in debt financing, in one of the largest recent publicly announced private placements that includes subordinated debt. Full Story