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Despite Huge Cash Hoard, Potential DIP Lenders Say Throw To Lions

Tyler Durden's picture





 

According the the Globe and Mail, the main reason Nortel decided to file for bankruptcy was Lazard's pathetic inability to raise even a dollar of Debtor In Possession financing.... Just for that we will go thru Lazard's court-filed fee applications with a fine-toothed comb, scouring for any expenses at these select Toronto establishments. As Zero speculated three days ago, the DIP market has ceased to exist, and no amount of TARP funding will force banks to lend, even when it comes to super secured loans, even when the interest rate that can be extracted would be considered usurious if people still cared about that thing, even when the creditor is such a formerly-legendary names as Nortel Networks.

Sources said "said the company's board opted for court protection because it was unable to raise conventional bankruptcy loans, known as debtor-in-possession or DIP financing. Typically, banks are eager to make DIP loans because they charge high rates and rank as one of the best-secured loans, but during the deepening credit crunch few banks are willing to lend well-protected loans to distressed borrowers. Without a DIP loan, one source said, Nortel's board opted to file for protection while it still had a large cash reserve and before it was required to pay more than $100-million Thursday to certain bondholders."

M&A bankers who recently left their posts in droves to join restructuring advisories in hopes of catching the upswing of the next bubble, may be left in the cold as Chapter 7 (where monthly retainers are non-existent) becomes the new Chapter 11.

 


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