Success in distressed situations requires a clear-eyed focus and measured judgment, qualities shared by attorneys in Cadwalader’s Distressed Finance Group.  This collaborative team of attorneys takes a creative yet pragmatic approach to solving issues facing lenders to distressed borrowers.

Our Distressed Finance practitioners, many of whom are recognized as pre-eminent in their field, are well-known to courts and global financial institutions and have achieved favorable results in many complex and significant reorganizations.  Drawing on the firm’s broad resources, our attorneys represent many of the largest domestic money-center commercial banks and international banking organizations as administrative agents and lenders in distressed situations.  The temperament, experience and judgment our attorneys bring to distressed credits and the negotiation of out-of-court restructurings has, time and again, enabled our clients to improve the quality of their credits and their returns, while avoiding the delays, costs and uncertainties of chapter 11. In situations where lenders need or desire to provide additional liquidity to a distressed borrower, our attorneys – drawing on their experience and expertise with the Uniform Commercial Code, Bankruptcy Code and other applicable laws and regulations – are adept at efficiently crafting practical solutions in the course of designing, negotiating and drafting rescue loans, DIP loans, and chapter 11 exit facilities, including documentation concerning complex operating and financial covenants, security, and intercreditor matters. 

Our practice is international in scope and our domestic offices work closely with our London attorneys in connection with cross-border financings.  By using a multidisciplinary approach, our clients benefit from Cadwalader’s strong experience in finance, capital markets, financial restructuring and bankruptcy, corporate transactions, and tax structuring.

Out-of-Court Restructurings
Lenders or an agent for a lending syndicate often must help steer a large, divergent group through what may be uncharted waters.  Moreover, every out-of-court restructuring presents its own challenges, the negotiation of which requires seasoned judgment and creativity to deal with the unpredictability that often colors a troubled loan. 

In-Court Restructurings
Oftentimes, the competing interests of lender groups of different lien priorities are not conducive to resolution through out-of-court negotiations, resorting in the voluntary or involuntary commencement of restructuring proceedings under chapter 11 of the Bankruptcy Code.  The protection and enforcement of the rights of competing creditor groups in the chapter 11 setting requires extensive experience with the many nuances and potential pitfalls associated with in-court bankruptcy proceedings. 

Rescue Financings
A borrower suffering through a liquidity crunch and facing the prospect of failure is among the most trying scenarios for lenders.  Oftentimes, rescue financing may avoid the need to resort to bankruptcy, provide a borrower with the breathing spell it needs, and enable the lenders to improve the economic and collateral position of their loan.  Understanding the risk-reward matrix in this distress modality is critical to a lender’s ability to determine whether to provide rescue financing.   

DIP Financings
Providing DIP financing often presents an opportunity for existing lenders to improve their lien priority and security position.  Also, DIP arrangements often allow lenders that are new to the borrower to obtain the strongest position in the debt structure.  Navigating the DIP process not only requires a solid grounding in credit, but a learned familiarity with bankruptcy courts and the constituencies that may voice concerns in connection with a DIP financing. 

Exit Financings
Opportunities for lenders do not exist solely at the commencement and during the pendency of a chapter 11 case.  Assessing the attractiveness of extending credit to a company emerging from bankruptcy requires attorneys possessing a proficient understanding of the bankruptcy process as well as the credit markets.