The Distressed Debt Report - October 7, 2006

Energy companies have been the hottest investment ticket for several years now, with high prices for oil and natural gas making the costly development and production of hard-to-get reserves worthwhile economic bets. But the energy price plummet over the last several weeks threatens to spook debt providers, dissuading them from making loans to small companies in that space. The threat of declining cash flow streams is rendering some pricier energy projects unjustifiable. Full Story

Some in the lending market claim they are seeing signs that could indicate the market is in the last throes of the current low-default cycle and trends in the writing of loan covenants that could exacerbate recovery prospects when defaults rise. Full Story

Companies Caught in Stock Option Scandal May be More Vulnerable to Default

A New York state court decision against consulting firm BearingPoint last month may have strengthened the position of hedge funds who are trying to call defaults against borrowers who have delayed filings with the Securities and Exchange Commission. Full Story

Secured lender NewStar Financial, with momentum behind its business, is planning to go public. The financial picture that the Boston-based firm revealed in the first public-company filing it made with the Securities and Exchange Commission last month shows what’s attractive about the secured lending market, and also some of the risks that lie ahead. Full Story

• American Capital Raises $1B Equity Fund
• Two New Court Decisions Reject ‘Deepening Insolvency’ Claims
• Best Manufacturing to Auction Uniform Business
• B of A, Tiger, SB Capital Back Winning Bid for Bankrupt Jeweler
• Amaranth Said to Be Cutting 60% of Staff

Wachovia Also Provides Revolver to REIT in Big Recent Deals

Wachovia Bank and Citigroup provided a $330 million term loan and a $45 million standby revolving line of credit to finance biotech company Orthofix International’s acquisition of Blackstone Medical in one of the biggest recent middle market debt arrangements. Full Story