Search Results for: "DIP Loan"
Also called “DIP financing,” a DIP loan is a line of credit or other credit provided to a DIP during a bankruptcy case, based upon meticulously-drafted DIP financing agreements that are reviewed by the bankruptcy court (and often the U.S. Trustee and any Committee) for, among other things, compliance with section 364 of the Bankruptcy Code. Because the DIP needs the money – bad – to reorganize, and because few lenders provide such financing, and because often only one lender (the DIP’s pre-petition lender) knows the DIP well enough to […]
Will lenders loan to a company in bankruptcy? In this installment, uncover the many intricacies of DIP financing & cash collateral motions in bankruptcy.
There is a seeming irony here in that a company that files for bankruptcy often does not have the cash to do so. That’s where DIP financing comes in.
Like a professional fee carve-out, secured creditors may also agree to a carve-out for unsecured creditors to appease the court and creditors’ committee.
Pacifying a Hostile Lender with a Motion to Substitute Collateral Can a Chapter 11 debtor confirm a plan that gives a hostile secured creditor a lien on an orange as a substitute, in essence, for the secured creditor’s lien on an apple that the debtor wants to keep and use?1 Yes, a motion to substitute collateral is valid if the value of the new lien meets the “indubitable equivalent” test with the value of the original lien. Substitute Collateral in Apples and Oranges Assume that the land-rich but cash-poor Chapter […]
A Series on the ABCs of ABCs, Business Bankruptcy & Corporate Restructuring/Insolvency Since a judge presides over a chapter 11 proceeding, one might assume that a chapter 11 case is like any other commercial litigation matter, with one party on each side of the case: a plaintiff and a defendant. One would be wrong (Felix Unger taught us what happens when we “ass-u-me”). In this installment of our series on business bankruptcy, restructuring and insolvency, we look at debtors, chapter 11 trustees, types of creditors and other parties involved in […]
Bankruptcy Valuation Valuation—the estimation of an entity’s worth—plays a crucial role in all stages of a commercial bankruptcy, as well in any out-of-court restructuring.¹ Valuation can be critical at the beginning of a bankruptcy case in determining whether the debtor can use cash collateral or obtain debtor-in-possession financing. At the confirmation stage, valuation plays a critical role in determining whether a chapter 11 plan can be confirmed and, if so, how much each class of creditors will receive on its claim. Even after confirmation, valuation is an essential issue in […]
Everybody knows that the dice are loaded: reclamation rights are illusory in bankruptcy cases. Where a supplier ships goods to a company that later files for bankruptcy, section 546(c) of the Bankruptcy Code provides reclamation remedies (i.e., supplier getting the goods back) under certain circumstances (there are time limits, etc.) if the supplier has such rights under state law (e.g., Uniform Commercial Code section 2-702). But most corporate debtors have a secured creditor in place with liens on all property of the debtor, including inventory and proceeds thereof. And most […]
Dealing With Distress For Fun & Profit – Installment #5 – A Peek Into Some Basic Chapter 11 Concepts
A written tour of business bankruptcy and its alternatives Subsequent installments in this series will cover the concepts touched upon here in more detail. We think it prudent, if not necessary, to at least throw some basic chapter 11 concepts on the table now, however, since they are so fundamental to any Chapter 11 case- regardless of which side of the table you sit on. The Automatic Stay Commencing a bankruptcy case triggers an “automatic stay,” which, with certain exceptions (carved out by §362(b)), operates as an injunction against actions […]
JPMorgan Chase & Co. and others (“JPM”) lent $1.5 billion to General Motors Corporation (“Old GM”) under a term loan agreement (the “Term Loan Agreement”). JPM was the senior secured creditor of Old GM. Old Gm went into chapter 11 bankruptcy. Under the terms of the DIP financing approved by the bankruptcy court, proceeds of the DIP loan were used to pay $1.5 billion to JPM for its claims under the Term Loan Agreement. The unsecured creditors committee formed in the Old GM chapter 11 case (the “Committee”) wants that […]