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Course Details

Course Information
  • smart_display Format

    On-Demand

  • signal_cellular_alt Difficulty Level

    Intermediate

  • work Practice Area

    Banking and Finance

Date & Time
  • event Date

    Thursday, June 13, 2024

  • schedule Time

    1:00 p.m. ET./10:00 a.m. PT

  • timer Program Length

    90 minutes

Credit Information

  • This 90-minute webinar is eligible in most states for 1.5 CLE credits.

$347.00
CLE
ALL

This CLE webinar will discuss debtor-in-possession (DIP) financing and common loan structures and terms. The panel will review the statutory basis for DIP financing, lender strategies and goals, the DIP financing process, loan structure and amount, price and fees, term and maturity, liens, covenants and events of default, and limitations on lender control.

Faculty

Bryan E. Bates
Partner
Parker, Hudson, Rainer & Dobbs LLP

Mr. Bates represents secured and unsecured creditors, debtors, committees, trustees and other parties-in-interest in Chapter 11 reorganization proceedings, insolvency matters, and debtor/creditor litigation, both in and out of court, including asset sales, reorganizations, litigation, and Chapter 11 proceedings. He also represents parties in business disputes and commercial litigation matters in state and federal courts.

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Q. Scott Kaye
Principal
Miller, Canfield, Paddock And Stone Plc

Mr. Kaye has extensive experience advising companies, lenders, sponsors, and private equity funds and their portfolio companies on finance matters, M&A, restructuring and other corporate matters. Having advised clients on more than $65 billion in financing and debt restructuring in hundreds of transactions, he represents lenders and borrowers in term, revolving and acquisition financing, asset-based lending, bridge financing, subscription lines, mezzanine and subordinated debt, second lien financing, DIP financing and trustees, debtors, DIP lenders, and creditors in out-of-court workouts and formal bankruptcy proceedings.

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Description

The primary reason for most Chapter 11 bankruptcy filings is an imminent lack of liquidity. DIP loans are typically asset-based, revolving working capital facilities put into place at the outset of a Chapter 11 filing to provide both immediate cash as well as ongoing working capital during the reorganization process. DIP financing is available in both unsecured and secured form, each of which provides a secured lender with incentives and protections to encourage it to lend money to a debtor.

A DIP loan facility may be structured as a term loan, revolving credit facility, or other form of credit. Because term loans are usually fully funded, such a structure could result in higher interest costs for the debtor. Revolving credit facilities generally have lower interest costs than a fully drawn term loan because the debtor may draw down the loan and repay only as necessary to maintain the court-approved budget. Depending on the situation, it may be appropriate for the DIP facility to be structured as a combination of both a term loan and a revolver.

The bankruptcy court must approve the terms of a DIP loan facility. In addition to collateral and a super-priority claim, DIP loans are typically designed with covenants and other protections to permit the DIP lender a full recovery even if the debtor liquidates. The loan documents and/or the DIP Order will typically provide: for a borrowing base; that all asset-sale proceeds must be applied to reduce the DIP loans and commitments; that the primed pre-bankruptcy lenders cannot exercise remedies until the DIP loan has been repaid; and that certain events, like conversion of the case to a Chapter 7 or appointment of a trustee in bankruptcy, permit the DIP lender to call the loan.

Listen as our authoritative panel evaluates the circumstances when a DIP loan is a sound strategy for a lender client. The panel will provide practice tips for selecting the appropriate DIP loan structure and for negotiating and documenting key loan terms.

Outline

  1. Overview of DIP financing: history, statutory basis, objectives and incentives of different parties
  2. Lender strategies: financing structures and common terms
  3. Court authorization for DIP financing
  4. Security and DIP lender protections
  5. Remedies and events of default
  6. Debtor acknowledgments, releases, and stipulations
  7. Priority claims and liens for DIP obligations: issues with intercreditor agreements, senior and junior lenders
  8. Adequate protection
  9. Enforcement
  10. Restrictions and waivers
  11. Miscellaneous provisions
  12. Litigation trends: provisions typically not allowed by bankruptcy courts
  13. Key takeaways

Benefits

The panel will review these and other key issues:

  • What are the strategic incentives and benefits for DIP lenders?
  • What protections does the Bankruptcy Code provide DIP lenders?
  • What are the common DIP financing structures and loan terms?
  • What are the key considerations when a lender is negotiating the terms of a DIP financing order or credit agreement?