In a recent FundFire article, Thompson Coburn Financial Restructuring & Bankruptcy partner Mark Indelicato discussed how recent high-profile corporate loan failures—such as First Brands—are casting an uncomfortable spotlight on a popular subset of private credit: asset-based lending. These cases underscore the reputational risk managers face when problems arise with a loan’s collateral.
These high-profile bankruptcies could offer a moment similar to the collapse of energy giant Enron in the early 2000s that spurred new accounting rules, and inspire private credit managers to start demanding better protections in their loan documents, said Mark.
“This is a real wake up call for them, regarding not only how they structure their deal, but how they monitor their deal and follow it,” he said. “I don’t think anybody anticipated irregularities of this magnitude.”
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