This highlights a big problem; companies seeking bankruptcy protection have a new hurdle: finding money to survive the bankruptcy process. While Buffets has some financing to survive for now, it sure looks like it’s over for that concept.
If banks are not lending to healthy companies, who is going to lend to bankrupt companies? The frozen credit markets are going to limit lending to struggling companies that need loans just to make it through Chapter 11 restructuring. Without the debtor-in-possession financing, companies filing for bankruptcy might not have any choice but to liquidate. This issue was made clear by Bennigan’s and Linens 'n Things, which was forced to liquidate last week.