Washington – Companies trying to emerge from Chapter 11 protection by the end of this year may have trouble securing financing, as credit-market woes extend into the niche arena of bankruptcy lending.
A credit tightening spurred by the collapse of the subprime mortgage industry is causing lenders to retool the pricing and terms of the financing they provide to companies leaving bankruptcy. The pullback, experts say, may send big Chapter 11 companies back to the table to negotiate with creditors and investors who were banking on cheaper financing.
“The expectations will need to be re-evaluated, not only by the company, but by the various constituents,” said Rob McMahon, managing director of restructuring finance for GE Corporate Lending. “For the larger-cap companies that have complex, complicated capital structures and constituencies, that will be a more laborious task.”
The difficulties could be especially acute for companies about to enter bankruptcy. Fewer companies are likely to emerge from Chapter 11 as stand-alone entities.
