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Given the challenging environment, a small but growing array of businesses are turning to double-dip loans to bolster liquidity, giving new lenders additional and sometimes superior claims on assets compared with existing lenders. Companies often pursue these deals to avoid running out of cash and lenders usually purchase the loans for increased collateral and potentially higher returns.
Double dips don’t fix companies’ underlying fundamental operational issues alone, said Lisa Donahue, co-head of Americas and Asia at consulting firm AlixPartners. “These types of liability management exercises are one small piece of the puzzle because at the end of the day, it’s just a Band-Aid,” said Donahue, former global co-head of the turnaround and restructuring practice at the firm.
