The Deal's Cover Story 'Rigors Of Rehab' Shows That The Market For Dip Loans Seems Alive, Yet Prices Are High And New Players Are Few

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Private equity and Wall Street firms slowly entering DIP market as reported in accompanying story "Some new faces at the table"

As the recession lingers, corporations seeking bankruptcy protection will need to turn to debtor-in-possession (DIP) financing to operate. Although the recent credit crunch has driven loan rates up, the DIP market still shows signs of life.

In The Deal's cover story, " Rigors of rehab," senior writer Vipal Monga and reporter John Blakeley note that DIP lending volume surged in the first quarter of 2009 as bankrupt companies secured $13.6 billion in total DIP financing commitments--the most since early 2007. However, a closer look reveals that the numbers are skewed. The surge in DIP lending is coming from relatively few borrowers, and since the recession has forced larger companies to seek bankruptcy protection, the size of DIP packages has increased. Plus, much of the funding hasn't been supported by much "new money," but rather from existing lenders. New money is available, but it is limited to the smaller end of the market--those under $1 billion.

If bankruptcy rates rise, as they are expected to, many companies will have to seek liquidation. With the high demand for DIP loans and low supply, many hope private equity will get into the market. As senior writer Vyvyan Tenorio writes in the accompanying story " Some new faces at the table," signs show that private equity firms have slowing been entering the market. Private equity investors believe there are attractive gains to be made though substantially discounted debt and DIP financings, especially when investment opportunities are few and far between.

Within the two stories, The Deal Pipeline's rankings of the top DIP lenders for the first quarter of 2009 are also included:

Top lenders by volume from the period of January 1 to March 31 include: 1.) Citigroup Inc. with $1,599.7 million 2.) General Electric Co. with $1,300.2 million 3.) Goldman Sachs Group Inc. with $912 million 4.) UBS AG with 862.7 million 5.) Silver Point Capital LP with 691 million.

Tying the top spot of lenders by number of commitments are Bank of America Corp. and Wells Fargo & Co. with 17. General Electric Co. holds third place with eight commitments, while Silver Point Capital LP holds five commitments. At fourth place with four commitments a piece are: Citigroup Inc., J.P. Morgan Chase & Co., PNC Financial Services Group Inc., CIT Group Inc. and Cerberus Capital Management LP.

Top new money DIP financings went the following debtors: 1.) Lyondell Chemical Co. with $3,250 million in new money 2.) Smurfit-Stone Container Corp. with $750 million 3.) Aleris International Inc. with $440 million 4.) Chemtura Corp. with $313.5 million. Tied for fifth place are: Gottschalks Inc. and Tronox Inc. with $125 million.

About The Deal LLC
The Deal LLC, ( ), is a diversified media company that is the authoritative voice of the deal economy. We serve the global deal community-corporate and financial dealmakers, advisers and institutional investors-by providing business and financial news and information that offers fresh insights on the deal economy, a set of interrelated activities, focused on dealmaking of all kinds, whose purpose is to generate corporate growth in a continually changing global market. We offer a comprehensive line of print and electronic products - The Deal Pipeline, The Deal, The Daily Deal and - and live annual events including Private Capital Symposium, Distressed Investing Forum, Corporate Dealmaker Forum and M&A Outlook. The Deal LLC, a privately held company, is owned by private investment funds, including U.S. Equity Partners LP, sponsored by Wasserstein & Co. LP.


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