One of the reasons we read books
is so we can learn from the mistakes of other's avoid making those
mistakes, and get on with making mistakes of our own.
Here's the key takeaway from the insolvency of venerable and giant
Krupp, brought low by what was in effect maturity transformation:
because it destroys the very existence of a firm"
-William Manchester, The Arms of Krupp
The family dynasty had a pretty good run, 1587 to 1968, for a while becoming the largest company in Europe before needing to be bailed out which required the fam to relinquish control.
Manchester's book is something like a half-million words long but it's those 18 in the quote above that really hit a nerve.
From an August 2007 post just after the quant-quake:
Liquidity in Business and Markets
I don't remember if it was Johannes or Ernst, it was a long time ago that I read Manchester, quoting one of the Schroeder boys on the insolvency of Krupp. That line has stuck with me. Here's the book.
Reposted in March 2024's "Arms Maker Rheinmetall Forecasts Record Sales, Profit Growth Amid Rising Geopolitical Tensions" (RHM.de).
From PitchBook, October 2:
The bankruptcy court overseeing the Chapter 11 proceedings of First Brands Group LLC on Oct. 1 gave interim approval to the company’s proposed $4.4 billion debtor-in-possession facility (DIP), clearing the company to access up to $500 million of the facility’s new money, according to an order entered in the case.
The company will be able to immediately access $175 million, with the remaining $325 million of the interim availability funded into an escrow account, with further disbursements subject to the DIP budget and the consent of lenders. Upon final approval, the DIP will provide the company with an additional $600 million, also to be funded into the escrow account, for an aggregate of $1.1 billion of new money.
The loan will also include a creeping roll-up of first-lien term loan obligations on a 3:1 basis to new money, so that $1.5 billion was rolled-up upon interim approval, and an additional $1.8 billion will be rolled up upon final approval.
The DIP will also repay $24.5 million of emergency bridge financing provided to the company in the week prior to the Chapter 11 filing.
A hearing on final approval was set for Oct. 29.
The company said in its motion seeking approval of the DIP that it filed for Chapter 11 with “a highly leveraged capital structure with over $10 billion in debt,” but with only approximately $14 million of cash on hand. The company said that a “precipitous decline” in its liquidity forced it to prepare for bankruptcy at “warp speed,” and that it urgently require[s] an injection of capital to stabilize its business.”
Interest under the facility for new-money loans is S+1,000, with S+155 payable in cash and the remaining 845 bps payable in-kind, while interest for the roll-up loans is S+700, payable monthly in-kind.
As for fees, the DIP carries an upfront premium of 5% payable in-kind, an exit premium of 5% cash, and an extension fee of 0.45% per each 45-day extension (see below). In addition, certain members of the ad hoc group will receive an “anchor premium” fee of 10% of the new money commitment, payable in-kind....
....MUCH MORE
