Glossary
Credit and risk
What is DIP financing?
Debtor-in-possession loans to a company in Chapter 11.
Court-approved, with super-priority. Often provided by existing lenders with a roll-up of their pre-filing debt.
A worked example
A company in Chapter 11 needs $150m to keep paying suppliers and staff. A DIP loan provides it and ranks ahead of most existing claims, which is why existing lenders often offer the DIP themselves to protect their position.
Where it catches you in the game
- DIP scenarios ask whose money to take, and at what cost to other creditors.
It comes up most on the restructuring desk.
Related terms
Learn it by using it
Definitions stick once they've cost you money. Take a seat, make three calls a year and watch what DIP financing does to your returns.