I wanted to see if anyone has experience lending to a sponsor who has previously voluntarily filed bankruptcy (chapter 11) through a borrower SPE on an unrelated property. Can share more details over PM. Thanks in advance.
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Quick Question pertaining to Chapter 11 and Debt issuance (Originally Posted: 10/31/2012)
Prepping for Capital Markets Interview, and came across an interesting case. There's this firm, currently in chapter 11 protection. So i'm doing my financial analysis (I have an ER background), and I stumble upon a large amount of LT debt in the Balance Sheet. Seeing as the firm was in Chapter 11 protection, I assumed it was an LT Credit facility. So I check the Income statement, no interest expenses what so ever. So I go to the next logical statement - Cashflow. Turns out that the firm has been issuing Debt securities for the past 2-3 years, averaging about $20M each year.
How is this possible if the firm is still in Chapter 11 ? I'm currently not by a Bloomberg Terminal, but from the little research I did, I couldn't find a credit rating for the firm's debt- I suspect that they are HY
Did you check to see if it's PIK debt?
As FRGNA said above, it probably has a PIK option. Also as an FYI, many DIP loans (credit facilities) have a bullet at maturity feature which means that there isn't a principal amortization schedule.
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