'Sponsors Are Getting More Aggressive' as Private Equity Turns to Bankruptcy to Increase Yields

Lorenzo Marinuzzi spoke to the American Lawyer about the bankruptcy of Instant Brands, which illustrates an increasing trend of private equity sponsors seeking higher yields through bankruptcy.

“We are seeing a lot of activity in distressed markets,” Lorenzo said. “A lot of maturities that got extended in 2020 are now due and companies that cannot refinance their way out of their problems are going to have to go to bankruptcy.”

He added: “Lenders and equity sponsors are getting more aggressive on DIP financing and the things they ask for. They are trying to figure out a way to lock up the case and prevent any meaningful opposition before the creditors’ committee is put in place. It does not surprise me they would ask for something in an interim order that drastic. The requests have been getting worse and worse from an unsecured creditors perspective.”

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