The Distressed Debt Report - May 7, 2006

Second Lien Legal Woes Could Bring Them Back

A once standard feature of mezzanine debt has gotten rare: The issue of stock warrants from the borrowing company to the lender. Larger borrowers began resisting the issue of warrants about two years ago, according to market players. Now, in the past year or so, even middle market borrowers have reportedly grown far more reluctant to offer warrants. Full Story

Lenders Ready to Finance Aggressive Deals in Radio

A former executive in Wells Fargo Foothill’s national media group has launched a new debt fund targeting radio stations, as expectations soar for a significant pickup in financing activity in that sector in the coming months. James Downey, who recently headed Wells’ national media lending group, opened Pacific Media Capital last month. The Santa Monica, Calif.-based fund plans to initially focus on U.S. radio and television financing, but eventually move into publishing and other communication-related sectors. Downey said he has already contracted for Pacific’s first deal, agreeing to help finance an acquisition of a radio and television station combo in the South. Full Story

A U.S. bankruptcy trustee is seeking to block unsecured noteholders from retrieving a few crumbs from principal secured lender CapitalSource in the bankruptcy of health care staffing firm World Health Alternatives. Holders facing more than $17 million in losses on largely unsecured loans had agreed to a settlement with CapitalSource, a big Chevy Chase, Md.-based finance company, on April 19. The agreement called for a $1.625 million payment from CapitalSource to the unsecured creditors. Full Story

• MetLife Starting Mezzanine Fund
• BofA, Back Bay Execs Start New Firm
• GSC Closes $413M CDO
• American Capital Hires Wachovia Banker to Lead Financial Services Group
• BB&T Raises $160M Mezz Fund
• J.L. French Unsecureds Won't Pursue Claims Against Second Lienholders
• Guggenheim Loaning MVC Up to $100M
• Canadian Venture Lender Gets $100M from Newstar, Other Investors
• JP Morgan Arranges $73.5M for Maker of Eskimo Pies
• Zwirn, Partners Buy Granite Broadcasting TV Stations
• Hirings and Firings

Middle market oil and gas producers were among the most aggressive issuers of subordinated debt in recent weeks as InterOil raised $130 million and Resaca Exploitation raised $95 million. Merrill Lynch and Clarion Finanz arranged InterOil’s financing. Full Story