Debtor-in-possession financing

(redirected from DIP Financing)

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 ?
ENPNewswire-August 6, 2019--WEATHERFORD RECEIVES FINAL COURT APPROVAL OF DIP FINANCING
With the DIP financing agreement, the company expects to work with its insurers, stakeholders, and third parties to create an agreed-upon strategy within the coming weeks to rebuild its damaged infrastructure and resume its refining operations.
The DIP financing, subject to court approval, will refinance portions of the company's existing reserve-based credit facility and provide an additional $100M in new money to support the company's day-to-day operations and finance the restructuring process.
The $35 million DIP financing, combined with the company's cash on hand and funds generated from ongoing operations, is expected to provide sufficient liquidity for the company to continue operating in the ordinary course during the sale process.
The DIP financing will provide Waypoint with ample liquidity to continue operating in the ordinary course during its Chapter 11 bankruptcy case.
In addition, Sears Holdings said it received commitments for $300 million in senior priming debtor-in-possession financing from its senior secured asset-based revolving lenders and is negotiating a $300 million subordinated DIP financing with ESL Investments Inc.
Subject to Court approval, this DIP financing, combined with the company's cash from operations, is expected to provide sufficient liquidity during the chapter 11 cases to support its continuing business operations and minimise disruption.
Meanwhile, Skeel (2003) points out that DIP financing, management incentives, other performance-related issue, and new players in the re-organization process (such as vulture investors and hedge funds) could ultimately change the rule of the game, and influence the outcome of the bankruptcy code.
The availability of these cheap funds is likely to increase the liquidation value of the firm and possibly decrease the disruptions to the market, even in situations in which otherwise necessary DIP financing would not be available.
According to Cash Store Financial, the court determined that the company's request for approval of debtor-in-possession financing will be considered at a hearing scheduled for tomorrow to afford the Court time to consider competing DIP Financing Proposals.
National, the public finance subsidiary of MBIA Inc, would be the second bond insurer to withdraw objections, following Assured Guaranty Municipal Corp, which on Monday dropped its objection to the swaps deal and DIP financing. A spokesman for National confirmed that the company's objections would be dropped.