Bridge financing in distressed situations is short-term liquidity engineered to provide runway for a restructuring, refinancing, or sale — at terms that reflect the underlying risk.
What a Distressed Bridge Is
Distressed bridge financing is short-term capital — typically 6 to 18 months — provided to a company in financial stress, designed to fund the runway needed to execute a restructuring, refinancing, sale, or operational turnaround.
The bridge is not the destination. It is the cost of buying time to reach a defined exit: refinanced debt, a sale, a recapitalisation, or successful restructuring proceedings.
Who Provides It and at What Price
Three broad provider types. Existing senior lenders with super-priority new money — most common when there is a clear restructuring path. Specialty finance providers (distressed funds, alternative lenders) — when bank capital cannot or will not extend. Sponsors via shareholder loans — when the equity story still holds and dilution is preferable to default.
Pricing reflects risk. Headline rates of 12–18% are not unusual for distressed bridge tranches; in stressed sectors or thinner-collateral situations, double that. The economics include warrants, equity kickers, and call structures that change the cost picture materially.
What Makes a Bridge Executable
A defined exit. Bridges that fund 'continued operations until things improve' rarely close. Bridges that fund a specific transaction or restructuring path on a credible timeline do.
Adequate collateral or super-priority position. Lenders need to be senior to existing debt or backed by unencumbered assets. Inter-creditor consent, where existing debt has restrictions, is the usual structuring puzzle.
And — frequently overlooked — credible governance. New money providers want to see the operating plan, the management team, and the advisor stack that will execute. The bridge is an investment in a plan; without the plan, the price spirals or the financing doesn't happen.