Restructuring is still tough for mid-sized companies, even as confidence about the economy has improved, according to a report by investment banking firm Morgan Joseph & Co Inc.
 
"Direct lending by hedge funds has virtually dried up as they are focused now on trading existing paper, with the result that new financing remains very expensive," said James Decker, head of the restructuring group, in the report.
 
Debtor-in-possession financing has become prohibitively expensive. About 35 percent of the fifteen most recent DIP facilities analyzed by Morgan Joseph had actual or implied spreads to LIBOR of 1000 basis points or higher.  
 
In contrast, the average DIP loan in 2009 was priced at a spread to LIBOR of almost 800 basis points. In 2008, spreads averaged in the 500 basis points range, according to the report.
 
"Though the financing markets have certainly improved, one should remain skeptical of those that proclaim the capital markets will quickly return to levels experienced just prior to the financial crisis," the report said.

"My phone has not stopped ringing," said Jerry Reisman, a partner at law firm Reisman, Peirez and Reisman in Garden City, New York. Reisman said he represents 21 groups that depend on CIT for factoring and other financing. He also represents an additional four parties that have applied to CIT for new business financing.

"People were astonished. They don't know what to do," said Riesman, who took more than 10 calls during Sunday's baseball World Series game and at least 10 more on Monday morning before 10 am EST.

"They have to make payroll this week -- they don't know whether they will be able to meet obligations for payroll or for suppliers."

One of the biggest concerns is so-called antecedent debt, which refers to checks from CIT that its clients have received in the past 90 days, said Reisman.

"Any money received from CIT in payment of antecedent debt is considered a preference, and, under the bankruptcy code, has to be returned to CIT," he said. "It could cause my clients to have to file bankruptcy. This could have a staggering domino effect. It's going to be devastating. It will destroy their own businesses."

Reisman said his firm is trying to find other sources of financing for his clients. "But now the problem is, some of them don't qualify because credit markets have tightened," he said. "They don't qualify for financing from other lenders."

Dunkin Donuts franchisees are particularly concerned, said Reisman.

"I also have as clients people who want to purchase Dunkin Donuts franchises, who have applications for financing pending. CIT has been the lender of choice, and we're not sure if CIT will be able to fund the acquisitions," he said.

How will CIT’s bankruptcy affect your business? Post your comments below:

In the first 45 days of Chrysler's bankruptcy, attorneys filed more than four times the number of pleadings than over the same period for collapsed corporate giants WorldCom or Enron.

More than 4,200 pleadings were filed in the Bankruptcy Court for the Southern District of New York, said NetDockets. That's more than the 967 pleadings related to Enron in the first six weeks, or even Lehman Brothers Holdings' 1,362 pleadings.

In the first 16 days after General Motors for bankruptcy, almost 1,800 pleadings were filed.

What does this mean for courts, for attorneys? Does it spur court investment in court clerks or electronic technology? Is it a gold mine for lawyers? A headache for the judge?

Already, a judicial body is urging Congress to authorize new bankruptcy judgeships to cope with a surge in bankruptcy filings that has tracked weakness in the U.S. economy.

More than 124,800 people sought protection from their creditors in bankruptcy court, up 37 percent from last year.

Business bankruptcies also soared 40 percent in May, according to bankruptcy data provider AACER.

According to AACER's Mike Bickford, personal and business bankruptcies will continue to rise, even if the economy gets better.

"Bankruptcy always has a lag effect," said Bickford. "People start filing months after they start having credit problems."

What do you see in your community?

In fact, the weather is expected to be just cold enough to prompt sweater purchases, but not so frigid that shoppers will avoid their holiday shopping.

According to Weather Trends International, which forecasts temperatures and conditions for U.S. retailers, December is expected to bring average temperatures of about 35 degrees, cold enough to prompt those sweater sales, and mostly free of blizzards -- which keep shoppers home.

"It's going to be a milder December," said Weather Trends Chief Executive Bill Kirk. "Not too hot, not too cold. Last year we had really cold weather and blizzards that killed store traffic. It's all about store traffic."

But beware of a Christmas weekend storm which will snarl traffic and keep consumers by their fireplaces, he said.

"Later December, around the 24th, the bottom may fall out," Kirk said. "We're advising clients to not expect that last week of December to be great (for sales)."

He said the last month of 2005 was notable for clear skies, allowing shoppers to run out to exchange items and use their gift cards. This year, it's likely to be a different.

"We have the whole country pretty much in a deep freeze by late December through mid-January," he said.

So, hang in there. This is coming. 

The holiday season is off and running, with a busy "Black Friday".

And while TMX Elmo may be in hot demand so far, that doesn't mean Stacey Daprato, a former teacher and New Jersey mom, is going to hold on to hers.

After seeing her 2-year-old son ignore the giggling, squirming Muppet at playgroups, she's decided to sell the one she'd bought him for Christmas on eBay.

"He didn't seem too impressed," she said.

So what did her son, Mattie, and his friends gravitate to instead? An anecdotal survey of two kids' play groups in Hasbrouck Heights, New Jersey found that toddlers ignored many of the season's hottest electronic gifts in favor of more tangible items the children could grasp and feel in creative control of.

That could spell trouble for this season's must have gifts like the Little Mommy Toddler animated doll, the Itsy Bitsy Interactive Spider-Man plush figure and TMX Elmo.

Instead of the one-button interaction of this season's most heavily promoted electronic gizmos, they flocked to a Little Tykes stand-up kitchen with a sink for stacking plastic dishes. They also grabbed up crayons, squished Play-Doh and rocked fanatically on a wooden rocking horse. Maybe the world isn't as electronic and virtual as some marketers would have you believe.

Indeed, most of the children, who ranged in age from 20 months to 2-1/2 years old, gravitated to toys that left the most up to the imagination. One of the most fought-over items?

No surprise, really. A cardboard box the toddlers took turns putting on their head.