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Debtor-in-Possession Financing

   Also found in: Wikipedia 0.01 sec.
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.


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Aa In the bankruptcy 11 filing, the company's senior secured lenders have committed $150 million in new debtor-in-possession financing that can be converted into exit financing once Reader's Digest leaves bankruptcy protection.
Ford Motor Company has executed a commitment letter to support debtor-in-possession financing for Visteon's restructuring efforts and to ensure long-term continuity of supply.
It's unlikely that financial institutions would be willing to provide debtor-in-possession financing, which would enable GM to operate in Chapter 11 bankruptcy, before such a restructuring.
 
 
 
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