In "ABI Report Suggests Limitations on Rollups in DIPs," Bankruptcy and Restructuring Partner, Madlyn Primoff, discussed with The Deal how the American Bankuprcy Institute's (ABI) proposed amendments to the Bankruptcy Code could open the door for a shifting attitude in the debtor-in possession financing (DIP) market.
"Broadly speaking, it's clear that the commission wants to open up DIP financing not just to the existing lender group but make it possible for new lenders to provide DIP financing," Madlyn said.
In terms of what valuation is used to determine adequate protection for secured lenders, Madlyn noted that the commission is advocating for "foreclosure value," which could open up the opportunity for "competitive DIP financing."
One example Primoff provided was if a secured lender is owed $80 million but the foreclosure value (as opposed to a going concern value of, say, $80 million) is $60 million, then an alternate lender only would have to adequately protect $60 million, not $80 million.
"It seems to create an opportunity for competing lenders," she said. "That frees up $20 million in value for DIP lending purposes."
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