Cram Ups As A Transformative Restructuring Strategy

Global economic conditions for deal-making remain advantageous, even with the headwinds created by protectionism, tariffs and the threat of trade wars, notes Barson Advisory, a leading financial advisory firm.  With it, the concept of debt reinstatement – colloquially referred to as “cram ups” – continues to serve as an important construct in the restructuring arena.  A number of companies raised sizable amounts of debt capital on covenant- lite terms when credit markets were particularly frothy.  But, in unexpected times of tighetinging credit makes and fears of downgrades, some borrowers have sought to effectuate a deleveraging of their balance sheet through the reinstatement of favorable loans in the context of chapter 11.  To be sure, a number of financings were made on financial terms that, if marked to market in today’s credit environment, would be prohibitively expensive.  In view of this, creative borrowers have crafted restructuring strategies which revolve around retaining the economic value of below-market secured lending arrangements.

Although a relatively recent phenomenon, debt reinstatement has appropriately surfaced as a legitimate technique to restructure balance sheets 11 around senior secured credit facilities by rendering them unimpaired.  Without question, bankruptcy courts will continue to face resourceful efforts by borrowers possessing valuable low-interest loans to implement debt reinstatement plans of reorganization, particularly in times of mounting stress in the credit markets.

Barson Advisory LLC is a boutique financial advisory firm which prides itself on creating superior value with unrivaled wisdom on behalf of its clients.