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An Introduction to DIP Financing
An Introduction to DIP Financing
First published in Practising Law Institute's Course Handbook: Nuts and Bolts of Corporate Bankruptcy, 2009
By Jane Lee Vris
Once a company becomes a Chapter 11 debtor, any financing arrangement the company wishes to engage in will require authorization under the Bankruptcy Code.1 This is true whether the financing is a continuation of an existing lending relationship or a new financing. Although this requirement is not stated directly, a number of provisions in the Bankruptcy Code effectively prohibit financings without authorization. Furthermore, even a company without a critical need for immediate financing will find that it requires authorization to use its cash in the event that cash is collateral. As a consequence, an understanding of the authorization needed and of the procedure for getting that authorization is a basic aspect of administration that every bankruptcy lawyer must know. These concepts are necessary not only for traditional credit arrangements, but also any extension of credit or incurrence of debt regardless of duration or size. Read entire article here.
111 U.S.C. §101 et seq.
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