Cram Down in Bankruptcy Proceedings
February 12, 2025
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As mentioned in the previous article, the financing required by companies in order to keep their operations afloat after filing bankruptcy is known as DIP financing. With regard to DIP financing, there is a standard market for lenders who offer DIP financing. There are investment bankers who specialize in helping clients obtain DIP financing.
However, the task is more complicated than helping debtors obtain regular financing. This is because the lenders know that there are very few options in which borrowers have to raise funds. As a result, they definitely have the upper hand in the negotiations. Hence, the lenders try to get the best deal that they can with the borrowers. However, these deals have to be accepted by the existing lenders as well. If they do not accept the deal, then the negotiations with the borrowers become null and void. As a result, existing lenders often use their clout to get the new borrower to give a better deal.
However, the entire process turns out to be very complicated. This is because, firstly, there are multiple parties involved. Also, secondly, there are various rounds of negotiations in which the details go back and forth several times.
There are various modes of financing which are used to secure DIP financing. The details of some of these modes have been explained in this article.
There are several modes of DIP financing which are used by borrowers and lenders. The details of some of these modes have been written below:
Apart from the above-mentioned modes, there are various unconventional modes which are used in DIP financing as well.
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