Credit Crisis' Next Victim: Bankruptcies

Dallas Morning News

October 03, 2008

Companies seeking bankruptcy protection have a new hurdle, thanks to the credit crunch: finding money to survive the process.

The frozen credit markets have choked lending to struggling companies that need loans just to make it through Chapter 11 restructuring.

Business insolvencies in North Texas and the U.S. are on the rise as credit markets grind gears and consumers spend less because of the chaos.

The needed loans aren't impossible to get if a company has hard assets to offer as collateral. But leveraged companies that live hand-to-mouth – like many retailers – may be able to get loans only at very high cost or perhaps not at all.

"It's a question of price," said Bob Albergotti of Haynes and Boone in Dallas, which has 34 attorneys in its restructuring group, among the nation's largest. "There's money out there – but folks aren't going to take fliers on companies."

With players such as Bear Stearns and Merrill Lynch purchased and with private equity firms running short of cash, the lack of competition makes it that much harder on companies that need the money now.

And there's possibly even less money for companies already in bankruptcy and looking for money to get out.

Reprinted from Dallas Morning News.  For the full story, please click here.

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