Creditors Not So Keen on Distressed Credit Swaps
What's the alternative to a bankrupt portfolio company? A distressed credit exchange. Private equity pros are fully aware of this option, because it keeps their companies afloat without requiring new capital infusions or equity dilutions. Today Bloomberg reported there have been at least seven such transactions this year. Compare that with last year, which saw a total of 12 for the entire year, according to S&P. Lenders and bondholders are none too happy about the rising number of distressed credit exchanges. And why should they be? Lenders are offered a chance to exchange debt at a discount for cash or new securities. The transaction essentially benefits the PE backer because it keeps the company afloat while the bondholders take a loss.
11 March 2009•3 mins read
