Some companies may find it makes more sense to forgo Chapter 11 given the lack of interest in competitors acquiring assets at auction: 'You need to show a path toward an exit'
Some companies may find it makes more sense to forgo Chapter 11 given the lack of interest in competitors acquiring assets at auction: "You need to show a path toward an exit."
VIP Cinemas got a lender to put up money for operations during the bankruptcy process. VIP’s creditors had agreed to swap debt for equity in the company. One private equity firm even consented to a new $7 million investment. Altogether, VIP had a plan to deleverage its balance sheet by about $178 million and position its business with enough cash to not only stabilize but also grow the business.
“I don’t think there is going to be a wave of Chapter 11s next week,” says Paul Zumbro, head of the restructuring practice at Cravath, Swaine & Moore. “There’s the difficulty of getting DIP [debtor-in-possession] financing. You need to show lenders a budget, and if you aren’t in a position to give any predictions, it’s going to be difficult to get a lender to provide that financing. You also need to show a path toward an exit.
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