Bankrupt Businesses Fight to Keep Cheaper Loans on Books as Interest Rates Rise
Steven B. Smith, partner in Herrick's Restructuring & Finance Litigation Department, spoke to The Wall Street Journal Pro - Bankruptcy about how financially distressed businesses looking to lessen their debt load often retire old loans and create new ones. Now, as interest rates continue to climb, more businesses are implementing debt reinstatement in their restructuring.
The article highlighted that debt reinstatement became favored after the 2008 credit crises when new financing was difficult to obtain. The practice's popularity declined again after the Fed held its interest rates at low levels. Steve noted that Herrick hasn’t seen so much interest in potential debt reinstatements in many years. “Interest rates were so low that there was no need for a company to preserve favorable pricing because they could go into the market” and refinance at similarly low rates.
Read the full article in The Wall Street Journal Pro - Bankruptcy here. Access may require a subscription.