Know How Financial Marketplace Works - A Short Introduction

According to a major news article about debtor in possession financing, over 150 companies defaulted on corporate debt in the previous year causing a spike in bankruptcy exit loan financing demand. Just who is exiting corporate bankruptcy?

In a large number of cases they are household names like Six Flags theme-park. Six Flags entered chapter 11 bankruptcy and exited with a secured credit facility of almost $850M financed by a syndicate including JP Morgan Chase. Six Flags is a great example of a company whose business is going well but due to maturing leveraged debt with no one was willing to refinance it. Hence, their only way out was to default and enter bankruptcy protection. Emerging from bankruptcy, there is a new market and a new class of financing available to them.

OK, don't start looking at your screen funny, first let me define a couple of terms for you. Ill start with the concept of exit loans.

When a company enters bankruptcy protection, they do so with the plan to exit from bankruptcy. In order to successfully exit, they need financing. This type of financing is referred to a leveraged loan or distressed debt.

A second question is why would someone loan money to a company that has a high chance of failure. The answer to the question is that the more risk the higher the payback and high flying investors love it! The are referred to as dip loan investors.

So where are the funds getting the capital? Basically leveraged loans outperformed high yield bonds this past year. Thus investors are plowing their money into leveraged loan funds and pulling them from high yield credit. But it isn't just a shifting of money from the high yield credit markets, there is net new money pouring into this market. A few of the statistics that can be found on line are that is that the leveraged loan market attracted almost 1.4 billion dollars this year and over 450 million has fled from the high yield credit markets.

As a result of the leveraged loan markets are rising and the issuance of corporate debt is down significantly. Some estimates show that corporate debt issuance is down almost 45% from the same period last year.

The other outstanding question is what happens to exit loans, bank loans, and high yield debt if the Fed raises rates. This is almost certain to happen as the Fed is trying to steer companies toward private sector financing as they surface from the troubles of 2008/2009.

Due to companies emerging from bankruptcy quicker and in need of financing, leveraged loan investors are in demand. This has created opportunity. With opportunity comes investors who are looking to make money. It will definitely be a market to keep an eye out for as the markets and corporations shake loose from one of the worst economic crisis since the great depression. This coupled with record defaults in 09 will create a lucrative sales environment for the leveraged debt industry all together.

For more information on dip loan investors, visit our website.

Wachovia Routing - Understanding the Importance of a Routing Number

Anytime you open a checking account with the Wachovia Bank you will notice that there are two different numbers on the bottom of your check. The first number is going to be your checking account number. This number is unique to you and your personal account. The second number is call a routing number and is unique to your bank. All checking accounts whether they are for personal use or for business use must have these numbers printed on the checks in order for them to be processed.

What the Numbers are used for

Your branch of the Wachovia bank may have thousands of members who have accounts there or it may be very small and only have a few hundred. The bank routing number is used be the financial clearing houses to decipher not only which banking system you use, such as Wachovia, but also to determine exactly which branch you bank with.

Each branch of the bank has its own unique routing number and while a small part of the number identifies the bank as a whole, the rest of the number highlights the branch that you opened your account with. This is done to help speed up the task of processing your checks; the numbers are printed in a particular format that allows computerized scanners to read them along with your account number.

How does this Apply to Me?

As Wachovia is only one of hundreds of banks in the country that are used by millions of people every day, the routing number on your checks is as important as your individual account number. This number makes it possible for the computerized clearing houses to process hundreds of checks per minute. Without this number the work would still have to be done by hand which would slow down the processing of any payments you made by check.

Each of the nine numbers in this routing number represents a different part of your banks address and the type of account you have. The first four digits in the number the specific US Federal Reserve check clearing center that your bank uses, the following four digits identify your particular bank and the ninth digit is used to verify that the check is valid. It is computed using a special formula that works with the other eight digits in the number.

Today you can use the bank routing number on any Wachovia checking account to pay many of your bills online instead of having to mail out the checks. This can save you both time and money as well as ensuring that the bills will be paid on time instead of having to worry about whether or not the check you send in the mail will arrive on time.

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