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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.

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 […]

A “roll-up” refers to a debtor-in-possession (or DIP) financing facility that is provided by the debtor’s prepetition (pre-bankruptcy) lenders and effectively pays off (or “rolls-up”) the prepetition secured debt. The roll-up can take place in a single stage or the debtor, as postpetition funding is obtained, applies an equivalent amount of proceeds first to the repayment of the prepetition facility until the outstanding obligations are fully “rolled” into the postpetition facility by the debtor. A roll-up effectively transforms the existing lenders’ prepetition claims into a postpetition, administrative expense.

Subchapter V works. It saves businesses. It helps the people that own those businesses. And it is cheap and fast, at least compared to “traditional” chapter 11.

In 2023, commercial Chapter 11 filings rose by 72% as compared to 2022. Read more about this surge and what to consider in 2024.

Chapter 15 of the Bankruptcy Code deals with foreign debtors with assets in the United States. It allows for disposition of the property.

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.

When your borrower files bankruptcy, choosing to cooperate can lead to a more successful restructuring or sale. Here’s how to protect yourself if you do.

A distressed exchange offer allows a struggling company to purchase its outstanding debt securities by offering new securities rather than cash.

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