As a result of the current financial crisis, U.S. lenders are denying loans to companies in bankruptcy protection.
" 'That's making it very tough to get a DIP loan to enter into bankruptcy,' said Jonathan Henes, a partner in the restructuring group at law firm Kirkland & Ellis LLP. 'If the credit markets don't open up, companies may need to start addressing issues regarding liquidations rather than reorganizations. We're seeing even good companies that happen to have bad balance sheets at risk of not making it through the process.'
Henes said that 'incumbent' lenders - the company's secured lenders from before the bankruptcy filing - are imposing higher fees and giving companies shorter deadlines. Banks, he said, are insisting on lining up a syndicate of loan buyers before committing to a bankruptcy loan."
This story appeared in its entirety in the October 2, 2008 edition of Daily Bankruptcy Review.