The Distressed Debt Report - July 7, 2006

Expected Wave of Complicated Restructurings May Drive Demand

Turnaround consultants and academics are developing new systems to work out insolvent companies’ obligations, offering to cut time and costs from the bankruptcy process.

Investors Pull Back from Some Riskier Deals, Forcing up Pricing

As one fund manager tells it, he received his first calls from bankers back in April, offering him part of the second lien piece of a $200 million debt financing by a Silicon Valley telecom company. Since declining to buy four months ago, the investor said he has heard back four more times from bankers pitching the same piece of debt – each time at a higher price. Last week, they were offering an interest rate 400 basis points above their original offer. Full Story

Lenders May Write Vague Intercreditor Terms to Win Deals

The debt market has gotten so competitive that some secured lenders may be intentionally writing ambiguous intercreditor agreements to win deals. Some equity sponsors of middle market companies are said to prefer less-than-clear agreements between first and second lienholders. They may believe that the resulting confusion could give them a hand up in any future restructuring. Full Story

• S.A.C. Hires Lender from Blackstone to Start Debt Group
• Tennenbaum Loans $52M to Company Caught in Stock Options Probe
• Wells Fargo Banker Says Enron, WorldCom Leave Legal Uncertainties for Loan Agents
• Boutique Bank Starting Leveraged Finance Group
• J.L. French Hands Keys to Second Lienholders
• Alvarez & Marsal Brings Former Wachovia Banker into Charlotte Office

General Electric’s financial service group for healthcare companies provided $405 million for an acquisition while Citigroup and UBS Investment Bank arranged financing for a combination of software companies, in two of the larger recent middle market debt financings. Full Story