Bankruptcies in the Middle Market: Trends and Financing Terms

This podcast episode explores the recent trends in middle-market distress, with a focus on dip structures and financing terms. The discussion highlights the challenges faced by middle-market companies, which are often thinly capitalized and lack sufficient hard assets compared to larger companies. The panelists discuss the increased use of Chapter 11 as a tool for sale processes rather than traditional reorganizations. They also examine the differences in dip lenders between middle-market and mega cases, with middle-market cases typically involving BDCs, family offices, and key customers, while mega cases often attract Money Center Banks and well-capitalized hedge funds. The panelists analyze pricing trends, including roll-up ratios, interest rates, and dip tenures, noting the impact of COVID-19 on these factors. Additionally, they discuss the potential impact on trade creditors, highlighting the higher fees associated with dip financing and the potential decrease in cash recovery for unsecured trade creditors.