As recently as the February, businesses in Chapter 11 bankruptcy were finding that investors were hungry to provide debtor in possession financing for companies in bankruptcy. But now it seems that the credit markets are freezing a bit and corporate debtors may need to become a little more creative when trying to secure the financing they need to successfully exit Chapter 11 bankruptcy and avoid some of the pitfalls that have nearly destroyed financing opportunities for other bankrupt companies.
- Work with a bankruptcy attorney and business advisors to create a prepackaged bankruptcy plan that will provide a smooth and quick transition through the process and subsequent exit from Chapter 11 bankruptcy. Back in 2009, it seemed that corporate debtors who stretched out their bankruptcy cases over a longer period of time received the sweetest financing deals; however the opposite now seems to be true.
- Quickly settle any legal spats that arise during your Chapter 11 bankruptcy. Smurfit Stone's debtor in possession financing was threatened when its own legal battles seemed to drag on too long. Many analysts believed that if the financing deal was withdrawn at that time a second deal would not have been as favorable to the company.
- Explore creative ways to finance your Chapter 11 bankruptcy exit. While many companies in Chapter 11 bankruptcy are still exploring high-yield bonds, they are also lining up term loans just in case they are unable to secure the financing they need in time.
- Finally, think about how your company will proceed if it is not able to secure the debtor in possession financing it needs to exit Chapter 11 bankruptcy.