The rising number of retailer bankruptcies has helped fuel $15.5 billion of DIP loans this year, data compiled by Bloomberg show, Bloomberg News reported on Friday. It’s making 2017 one of the busiest years for DIP loans since the Great Recession. “It’s a place to put your dollars short-term with a nice yield,” said Shap Smith, head of restructuring finance at Citigroup Inc. “It’s a great alternative to the more traditional market, which can be expensive.” Toys ‘R’ Us filed for chapter 11 in September after a squeeze by its vendors left it unable to manage its $5 billion debt load. Lenders including Franklin Resources Inc. and Marathon Asset Management vied to provide $3.1 billion of DIP loans that are helping to keep the retailer’s shelves stocked through the holidays while refinancing some of its existing debt. In one $450 million piece of the debt, demand from investors allowed the retailer to cut its proposed borrowing rate by 0.75 percentage point to 6.75 percentage points more than the London interbank offered rate (for a total of about 8.1 percent currently). That will potentially save America’s biggest toy seller about $4.4 million in interest over the life of the borrowing, data compiled by Bloomberg show.
