Distressed Finance

Success in distressed situations requires a clear-eyed focus and measured judgment, qualities shared by a collaborative team of Cadwalader attorneys who take a creative yet pragmatic approach to solving issues facing lenders and distressed borrowers. 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 insolvency procedures.

In situations where there is a need or desire for additional liquidity for a distressed borrower, our attorneys craft 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.

With national and international reputations, our attorneys are well-known to financial market participants and courts in the US and the world, having achieved favorable results in many complex and significant workouts and reorganizations. Cadwalader represents many of the largest international and domestic investment and commercial banks, secondary investors and other lenders in troubled leveraged finance transactions, in super-priority and other syndicated lending transactions, and in chapter 11 debtor-in-possession financings.

Our experience extends to implementing and monitoring these restructuring arrangements throughout all stages - from origination to collateral recovery or exit financing.

Rescue Financings: A borrower suffering 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 space it needs, and enable the lenders to improve the economic and collateral position of their loan. Understanding the risk-reward matrix in a distressed scenario is critical to a lender’s ability to determine whether to provide rescue financing.

Consensual Restructurings: Lenders or agents for lending syndicates often must help steer large, divergent creditor groups through what may be uncharted waters. 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.

Court-based Restructurings: The competing interests of creditors groups of different priorities are not always 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 in the US, through a scheme of arrangement or administration in the UK or similar procedure overseas. The protection and enforcement of the rights of competing creditor groups within a formal procedure requires experience with the nuances and potential pitfalls associated with court-based proceedings.

Post-Petition Financings: Providing post-petition financing often presents an opportunity for existing lenders to improve their lien priority and security position. Also, post-petition arrangements often allow lenders that are new to the borrower to obtain the strongest position in the debt structure. Navigating the post-petition 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 the financing. Our attorneys have handled many notable post-petition financings.

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 formal bankruptcy or court proceeding. Assessing the attractiveness of extending credit to a company emerging from a process requires attorneys possessing a proficient understanding of bankruptcy as well as the credit markets.

  • United States Treasury Department Presidential Auto Task Force with respect to the restructuring of Chrysler LLC and General Motors Corporation and their related finance companies, which led to the emergence from bankruptcy of Chrysler in 42 days and General Motors in 41 days.
  • United States Treasury Department Presidential Auto Task Force on General Motors’ exposure to Delphi Corporation and worked with the major stakeholders in Delphi's bankruptcy to achieve a successful emergence of Delphi from bankruptcy that involved a sale of substantially all of Delphi's assets to its lenders and General Motors.
  • Xerium Technologies in its prepackaged Chapter 11 restructuring of approximately $600 million of bank debt and related interest rate swaps.
  • More than 20 of the world’s leading financial institutions, funds and other investors as creditors of Lehman Brothers in assessing and managing their exposure.
  • Parties interested in buying and selling distressed assets from Lehman Brothers, AIG, and other leading bankrupt or severely distressed companies.
  • The acquisition of the Bear Stearns Companies Inc. by JP Morgan Chase.
  • Northwest Airlines, Inc. in its reorganization under chapter 11 of the U.S. Bankruptcy Code, including advice regarding business combinations with strategic partners.
  • A top-tier private equity firm in the acquisition of more than $1 billion of distressed debt.
  • A leading private equity firm in the analysis of a multi-billion dollar distressed debt portfolio of Hilton Hotels.
  • Bay Harbour Management LC and affiliates as stalking horse bidder in the $160 million purchase of retailer Steve & Barry’s LLC.
  • CIFG Holding, Ltd., the holding company for CIFG’s financial guaranty subsidiaries, and its principal shareholders, Banque Populaire Group and Caisse d’Epargne Group, in commuting approximately $12 billion in notional ABS CDO and CRE CDO exposures in exchange for cash and equity.
  • A large regional airline carrier in reaching an out-of-court settlement with equity sponsors and labor groups.
  • XL Capital, Ltd., a Bermuda-based insurance company, in the restructuring of monoline insurance company Security Capital Assurance Ltd.
  • Barclay’s Capital, the agent for the first lien facility and DIP financing in LandSource Communities Development LLC.
  • JPMorgan Chase Bank, as administrative agent in the Centro Properties restructuring.
  • The senior mezzanine lender to Macklowe Properties Inc. in connection with a restructuring of mortgage indebtedness on four major New York City real estate properties.
  • The Royal Bank of Scotland in the refinancing and restructuring of its GMAC and ResCap debt, resulting in a new $13 billion dollar GMAC facility.

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14 Attorneys

Bagby, Ingrid Partner New York
T. +1 212 504 6894
Ellenberg, Mark C. Consulting Attorney Washington
T. +1 202 862 2238
Flippen, John T. Senior Attorney New York
T. +1 212 504 6992
Greenberg, Andrew M. Associate New York
T. +1 212 504 6077
Herman, Steven M. Partner New York
T. +1 212 504 6054
Ingram, Jacqueline Special Counsel London
T. +44 (0) 20 7170 8516
Johnson, Stephen M. Associate Charlotte
T. +1 704 348 5165
McDermott, Christopher M. Partner Charlotte
T. +1 704 348 5184
New York
T. +1 212 504 6184
Nagle, Jeffrey Partner Charlotte
T. +1 704 348 5267
Nevins, Richard Partner London
T. +44 (0) 20 7170 8624
Ng, Yushan Partner London
T. +44 (0) 20 7170 8566
Petrick, Gregory M. Partner London
T. +44 (0) 20 7170 8688
New York
T. +1 212 504 6373
Stempler, Matthew A. Senior Attorney Charlotte
T. +1 704 348 5179
Watt, Louisa Partner London
T. +44 (0) 20 7170 8678

Contact(s)

Mark C. Ellenberg
+1 202 862 2238 
mark.ellenberg@cwt.com
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Steven M. Herman
+1 212 504 6054 
steven.herman@cwt.com
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