A new strategy to protect some creditors from losing their place in line to be repaid will spread quickly among big, direct-lending deals, analysts at Moody’s Ratings wrote in a new report.
Lenders are likely to demand new language in debt contracts in order to block troubled companies from using an aggressive financing technique known as the double dip, which benefits new creditors at the expense of older ones.
The double dip allows new creditors to loan money to a subsidiary of a borrower, securing the debt with liens on intercompany loans. If the parent company later goes bankrupt, the ...