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Unpublished Paper
DIP Lending and the Death of Emergence: Reorganization Outcomes Post-Crisis
ExpressO (2011)
  • Aditya Habbu, Fordham Law School
  • Nikhil Abraham, University of Chicago
Abstract

We examine bankruptcy successes and failures before and after the credit crisis for those debtors that sought DIP loans. We found that post-crisis, for companies that filed for bankruptcy stand alone emergences decreased (percentage-wise), while sales increased. Additionally, we found that post-crisis private equity fund involvement in debtor in possession (“DIP”) loans increased, and DIP loan interest rates increased as well. To supplement the analysis we surveyed practitioners, interviewing two Federal bankruptcy judges, a restructuring investment bank managing director, as well as DIP lenders. These interviews and our data support the view that while DIP loans were once a path to emergence, DIP loans are now a path to sale.

Keywords
  • Chapter 11,
  • bankruptcy,
  • debtor-in-possession financing,
  • post-petition financing rules
Disciplines
Publication Date
March 5, 2011
Citation Information
Aditya Habbu and Nikhil Abraham. "DIP Lending and the Death of Emergence: Reorganization Outcomes Post-Crisis" ExpressO (2011)
Available at: http://works.bepress.com/nikhil_abraham/1/