The Distressed Debt Report - November 21, 2005

One-Stop Financing Gaining Popularity

Providers of so-called “one-stop” loans appear to be taking market share from banks and traditional second-lien lenders by providing a more convenient and in some cases cheaper product.

Rates, Costs Stressing Borrowers

Steven Ellis, head of the junior capital group at the law firm of Proskauer Rose in Boston, says that his lender clients have told him of four or five loan defaults in the past month-and-a-half or so. Before that he’d only heard of one default in the previous eight months. Full Story

Underwriter Plans $120M in IP-backed Loans in '06

Xybernaut Corp.’s patents and trademarks are worth all of $804,088 under generally accepted accounting principles. That’s what the company, which bills itself as an innovator of “wearable” computer products, stated last month in filings for its Chapter 11 bankruptcy proceeding. Full Story

• Hedge Funds Squeeze Into New Niche of Tiny Loans
• Capri Closes $287.5M Mezzanine Real Estate Fund
• TICC Managers Launch AIM-Listed Fund
• American Capital Provides $104M for Arcapita's Purchase of Tensar
• Guggenheim Provides $100M in Second Lien Debt for Quest
• BNP Juices Goodrich Petroleum Credit Package with $30M Second
• Back Bay Capital Closes $40M Second Lien for Exercise Equipment Maker
• CapitalSource Backs $50M Acquisition of Home Security Firm
• IT&E Paying Off $5M Convertible Loan from Laurus
• Key Principal Provides $6.5M Financing for Brookstone's Anomatic
• Citigroup Invests $25M in Chinese Middle Market Lender
• Deutsche Bank, J.P. Morgan to Arrange $645M in Debt for Coinmach
• Hirings and Firings

Lenders are often providing better terms in so-called one-stop financing transactions than in more traditionally structured second lien deals. In a one-stop deal, a single lender provides the revolver and term loans, as opposed to different lenders taking difference tranches of debt. The one-stop structure reduces the lender’s risk of losing security to a co-lender if the borrower defaults. Without that risk, borrowers are sometimes willing to accept a lower blended interest rate on the subordinated portion of a loan. Full Story