OK, so we know the subprime crisis and the tightened credit markets have made the cost of money unbelievably steep. But 25% for a $20 million debtor-in-possession loan? That's what homebuilder Empire Land LLC, which filed for Chapter 11 in the U.S. Bankruptcy Court for the Central District of California in Riverside on Friday, will pay. And if it defaults on the DIP, Empire will pay 27%.
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Empire had an ownership stake in 14 separate development projects on 11,800 separate lots on March 31 before default led to bankruptcy. The Ontario, Calif., developer is getting the DIP loan from Palmdale Land Investors LLC. And in case you're wondering, that's the most expensive DIP loan of all time, according to Bankruptcyinsider.com. (Calpine Corp's $10 billion DIP is the largest of all time.)
But will Empire's new record last? After all, the bankruptcy up-cycle has only begun. And like the price of milk and oil, DIP financing may only be a commodity whose price increases. - Terry Brennan
See related story about Calpine's DIP from TheDeal.com
