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The Impact of the Credit Crisis on DIP Financing

By Michael H. Torkin and Danielle B. Kalish
August 24, 2009

Corporate and consumer spending has continued to decline since the second half of 2008. As a result, many highly leveraged companies have continued to face severe liquidity constraints as cash flow continues to decline, and borrowing bases for asset-based facilities decrease. Prior to the global credit pandemic, a company in default or that faced a near-term covenant breach could either obtain relief through waivers and amendments, or refinancings. As the availability of credit shrank, the latter choice was no longer a viable solution. Moreover, a by-product of the frozen credit markets was the unexpected contraction of available debtor-in-possession financing (DIP financing).

DIP Financing

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