Actionable Ideas for Companies and Sponsors
Incremental Financings for Stressed and Distressed Companies
For stressed and distressed issuers in need of additional liquidity to bridge to an operational turnaround or to meet seasonal working capital needs, there is an ability to utilize the various debt and lien incurrence baskets under existing credit facilities to raise significant first-in, last-out (FILO) financing behind an existing asset-based loan or an incremental term loan pari passu with the company’s existing term loan.
These strategies have seen increasing use in recent quarters. Examples include: 1) Revlon, which bolstered its liquidity in 2018 via an amendment to its credit facility to provide for a FILO tranche and recently extended that facility’s maturity to April 2020 as it continues to execute on the integration of Elizabeth Arden; 2) Dayton Superior, which secured a rescue loan from Solus Alternative Asset Management to help address seasonal working capital swings; and 3) Sears Canada, which raised an incremental facility of $300 million to shore up liquidity in the midst of a challenging retail environment.