Thursday, April 23, 2009

Is DIP Financing Starting to Pick Up?

Bankruptcy filings have increased during this financial crisis, but debtors in possession have had trouble finding financing. That may be until now. Last week the Wall Street Journal's website reported that a few firms had choices in selecting lenders for their bankruptcies.

As Jonathan Spagat reported last week in General Growth Files for Bankruptcy the REIT filed for bankruptcy, but it had its choice in selecting lenders. In fact "a number of lenders expressed interest in providing the loan."

The WSJ Online article goes on to say that two other firms had lending choices over the past two months. Potential lenders for Aventine Renewable Energy Holdings, Inc. even had lenders go to court and fight for the opportunity to lend. Chemtura Corp, a chemical company, had two lenders to decide from. The company eventually picked Citigroup, Inc.

Increases in DIP lending may be good news for the economy and lawyers. It may indicate that banks are starting to lend again and lawyers may become busy with bankruptcy cases.