The struggling UK restaurant chain secured £ 70million ($ 86million) from HPS Investment Partners in mid-March. As a super senior loan, it will be paid off first in the event of bankruptcy. Now, other companies are looking for investors willing to provide emergency liquidity to the safest part of the debt pile.
When contracts permit, this type of borrowing could make the difference between business failure or survival. Ordinarily, existing lenders would not agree to a debt being placed in front of them, but in distress or emergency situations, they are more likely to view it favorably, according to Matthew cox, partner at Baker & McKenzie law firm in London.
“We expect to see more and more loans of this type in the coming weeks,” he said, adding that his clients were “actively looking” for super senior opportunities.
Direct lending funds are looking to get into those situations where it used to be banks, he said.
“A trend is developing where alternative credit providers are closing the gap as they did in some ways after the financial crisis,” Cox said.
On Tuesday, cruise line Carnival Corp., which plans a
Borrowers including the French equipment rental company
A spokesperson for Loxam said the company has no plans to apply for a super senior loan. Cirsa declined to comment.
“This is clearly an option available to us,” said an eDreams spokesperson, adding that the company had drawn 170 million euros ($ 187 million) from its senior revolving credit facility. “This is one of the strengths of our record.
Private equity owners and troubled debt funds are also natural providers of this type of financing. KKR Credit Advisors provided 50 million euros
“We are urgently working with clients to find creative solutions,” said
However, while some investors are investigating loan opportunities, others are trying to determine if debt is going to be placed on top of them in the structure, thereby reducing the value of their holdings. Subscribers to the research firm Covenant Review are increasingly wondering how borrowers can raise this funding.
The investor lobby group European Leveraged Finance Association is hosting webinars to show its members how to know if high yield bond covenants allow companies to issue this type of debt.
Another area of secure credit that will see an increase in activity is debt financing, according to
“Lenders will seek to structure loans in this way to improve the borrowing capacity of a business,” he said.
(Updates with commentary from Loxam, detail on Carnival)
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