The Distressed Debt Report - April 7, 2006

Bankruptcy lawyers and attorneys for lenders are growing worried that the courts will soon lose tolerance for disputes between first and second lienholders. Such cases are increasingly slowing companies’ reorganizations, leaving less for creditors to recover. Full Story

Some of the biggest players in the U.S. subordinated lending market are ranging north of the border in search of better deals. Goldman Sachs Specialty Lending Group, for one, recently opened a Toronto office headed by Robert Olsen, a longtime player in the Canadian mezzanine lending market. Fortress Investment Group started a Canadian fund last year, whose products include second lien debt. The New York-based firm has said it plans to take its Canadian fund public. Merrill Lynch is also expanding its Canadian operations with plans to provide more debt financing for acquisitions, the National Post of Canada reported last month. Full Story

Meridian Automotive Systems is proposing to exchange $180 million in second lien debt for stock under the terms of a bankruptcy reorganization plan that would see senior lenders recoup most of their principal. Full Story

• SBA Seeks to Liquidate Three SBIC Funds
• GSC Names Former Blackrock Executive to Head Real Estate Fund
• Fortress, Brookfield Provide $300M for Enterra Acquisition
• TA Raises $777.5M Sub Debt Fund
• Foamex Seeks Extension on Reorganization
• TCW Raises $510M for Distressed Fund
• Hirings & Firings

Real estate investment trusts MortgageIT Holdings and Windrose Medical Properties each raised $50 million last month through private placements of subordinated debt. Other issuers of subordinated debt in March include IRX Therapeutics, snack food maker Double B Foods, and graphic design firm The CAPS Group, according to Capital IQ’s data base of publicly announced transactions. Full Story