Debtor-in-possession financing

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Debtor-in-possession financing

New debt obtained by a firm during the Chapter 11 bankruptcy process, Federal Bankruptcy Rule 4001 (c)(1). This financing is unique because it is secured, that is, it has priority over existing debt, equity and other claims.

Debtor-in-Possession Financing

Financing made available to a debtor in possession, which is a company that maintains its operations during a Chapter 11 bankruptcy. A debtor in possession is generally attempting to fulfill its reorganization plan, discharging certain debts and changing any structural weaknesses to put it on a path to profitability. A company often requires financing in order to restructure, and DIP financing enables it to do so.
References in periodicals archive ?
3 billion DIP financing is the largest DIP financing in history.
We are pleased that the court has granted Pinnacle final approval for DIP financing with the support of the unsecured creditors' committee," said Sean Menke, president and CEO of Pinnacle.
Funding for the DIP financing is being provided by Delta Air Lines Inc (NYSE:DAL).
Air Canada on Monday said that following the filing by Aveos Fleet Performance for insolvency protection under the CAA, Air Canada has extended to Aveos CAD15m DIP financing.
Mervyns LLC said that it would use the DIP financing and cash generated from operations to pay vendors and cover operating costs as part of its restructuring plans.
Proceeds of the DIP financing, along with cash generated from daily operations and cash on hand, will be used to fund post-petition operating expenses, such as supplier organizations and employee salaries.
DIP financing may be used to pay professionals (the debtor's legal and financial advisors, the monitor and its legal advisors and sometimes stake-holder's legal and financial advisors), to provide operating financing to maintain the debtor's business during the restructuring process, sometimes to finance necessary capital expenditures, to pay for the costs of necessary repairs or maintenance of the assets of the debtor and to fund the marketing of all or a portion of the debtor's property.
The bank decided on the rare long-term DIP financing because rehabilitation of the driving school in the town of Inagawa is possible, the officials said.
Such a legal proceeding currently would constitute an event of default under the existing DIP Financing.
Robert Grammen (Managing Director of EFO's DIP Financing activities since 1999) commented that "the DIP Financing space has remained attractive because of the fact that our capital was secured by good real estate assets and, more importantly, our capital has saved thousands of jobs locally and throughout the United States.
July 24, 2013 /PRNewswire/ -- Exide Technologies, a global leader in stored electrical solutions, reported today that it has received final Bankruptcy Court approval of its $500 million debtor-in-possession (DIP) financing provided by JPM Chase and a group of lenders to whom the DIP financing was syndicated.
DIP financing for the company has been approved on an interim basis.