At Cadwalader, we believe that the truest measure of our success is the success of our clients. Our case studies provide insight into how we help our clients deal with challenges and seize opportunities in the area of distressed finance: Avoiding Chapter 11
Cadwalader’s Distressed Finance team represented a group of senior lenders under a secured credit facility of approximately $1.9 billion provided to a major international resort operator. The challenges were immediate upon the inception of the representation: the borrower was experiencing significant financial and operational strain as its debt facilities were nearing maturity and could only be modified with the consent of 100% of the lenders. Cadwalader thoroughly analyzed the senior lenders’ position and worked with the senior lenders to craft a structure pursuant to which the borrower and its affiliates agreed to purchase a portion of the senior debt and provide an additional loan, both of which shared the same collateral as the senior debt but were contractually subordinated in payment and remedy-enforcement, which entailed a highly negotiated and carefully crafted intercreditor and subordination agreement. This structure was necessary because it was the only alternative that could be achieved quickly, inexpensively and would ensure the borrower would avoid chapter 11. Cadwalader’s Distressed Finance Group worked through the initially divergent views of the lender group to achieve the 100% consensus required under the debt facility and rapidly devised a economically superior deal for the senior secured lenders while still keeping the borrower out of what could have been a lengthy, contentious, and expensive bankruptcy case. DIP Financing
Cadwalader worked with the hedge fund lender and others to formulate and implement that strategy, advising on a variety of potential outcomes as well as providing the legal muscle to pull together negotiated DIP commitment papers and debt documents rapidly. The hedge fund’s DIP proposal was ultimately not utilized. However, the stalled workout negotiations were recommenced - due in part to the fully credible proposal offered by a determined party with the legal backing that Cadwalader provided. Secured Exit Financing
Cadwalader represented a major financial institution in its bid to provide a proposed $110 million senior secured exit financing for the acquisition of an industrial debtor by a large hedge fund and certain stockholders of the debtor in connection with the debtor’s plan of reorganization and emergence from bankruptcy. In pursuing the exit financing, Cadwalader’s Distressed Finance team assisted our client in complex diligence related to the debtor’s business on several fronts: environmental, business projections, and asset valuation, among others. Assessment of legal risk took paramount importance. Ultimately, based in part on that diligence and the fast-evolving situation of the debtor, the exit financing was not consummated despite substantial effort. In assessing distressed situations, sometimes a clear-eyed appraisal of the situation discloses that the best result is to walk away.
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