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The Impact of the Credit Crisis on DIP Financing

A byproduct of the frozen credit markets was the unexpected contraction of available debtor-in-possession financing (DIP financing). Historically, DIP financings have had the lowest default rates among commercial loans, and until the recent market disruption, only two significant DIP loans had defaulted, and only one of those resulting in a sub-par recovery.

21 minute read September 29, 2009 at 04:40 PM
By
Michael H. Torkin and Danielle B. Kalish
The Impact of the Credit Crisis on DIP Financing

Corporate and consumer spending have 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.

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