The Distressed Debt Report - April 21, 2006

In the past three weeks, oil exploration companies Opti Canada and MEG Energy have prepared to raise a combined $1.15 billion in syndicated bank debt. How much cash flow have the two companies generated to show they can support so much debt? Zero. Full Story

Vendors that serve distressed sectors may start actively pursuing second lien positions on loans – and senior lenders may have no choice but to oblige. Suppliers of goods and services are beginning to take notice of probable collection problems from today’s overleveraged customers in the next downturn in the economy. Taking advantage of the relatively new techniques of the second lien market could help lift the vendors above the class of unsecured creditors, where vendors are usually placed in a bankruptcy, and that often receive only pennies on the dollar for their claims. Full Story

Mezzanine funds in the U.S. raised at least $4.08 billion from investors in the first quarter, according to a new market survey. The first quarter’s fundraising puts 2006 on pace to be the biggest year ever for new capital. Full Story

The results of the bankruptcy cases of Musicland, Wherehouse Entertainment, and Tower Records may encourage more vendors to negotiate for second lien positions on their troubled customers’ loans. The sale of Musicland last month to Albany, N.Y.-based Trans World Entertainment was closely watched by bankruptcy lawyers and turnaround consultants. Full Story

Middle market lender Ares Capital and hedge fund Dune Capital arranged $125 million in senior subordinated notes to help finance private equity firm Centre Partners’ acquisition of a chain of kidney dialysis clinics. Full Story

• Horizon Files for $200M IPO
• GE Forecasts 15% 2nd Qtr Profit Growth for Commercial Finance
• Jefferies, Credit Suisse Arrange $85M to Bail Out Maker of Equal Brand Sweetener
• Distressed Funds Among Worst Performers in '06
• Merrill to Offer Equipment Finance in Canada
• Hirings & Firings