DIP So patchy natterings has suggested it is not DIP but DIC, but NCU news says DIP, so I will go with that.
Fluff has his usual rose coloured glasses on, all good. He says money will be used for continuing operations, but news is pretty clear operations are shut down.
have known fluff for years, always presents a rosy picture, but never once seen him present false information, so treat his observation of continuing operations as a forecast, which fits well with the DIP.
from thier news "The Company has received a commitment for US$60 million debtor-in-possession (“DIP”) financing to provide liquidity through the restructuring period, of which the Company is asking that US$20 million would be available on an interim basis. The Company is seeking approval from the U.S. Bankruptcy Court for the DIP financing.
Through the restructuring process, the Company does not expect to continue operations, but does intend to take steps to preserve and protect its assets. "
Yet this article on DIP is quite clear that the dip is used to maintain operations with the intent of coming out with the debts paid.
1/ Nobody ponies up with 60M if the horse is dead.
2/ at this point, the one with 60M wants to be front of the line to be paid back, thus the chapter 11 with DIP.
3/ very possible come out the other side looking very good
4/ also very possible all is lost, debtors get paid, shareholders get the usual.
KW
What Is Debtor-in-Possession (DIP) Financing?
Debtor-in-possession (DIP) financing is a special kind of financing meant for companies that are in bankruptcy. Only companies that have filed for bankruptcy protection under Chapter 11 are allowed to access DIP financing, which usually happens at the start of a filing. DIP financing is used to facilitate the reorganization of a debtor-in-possession (the status of a company that has filed for bankruptcy) by allowing it to raise capital to fund its operations as its bankruptcy case runs its course. DIP financing is unique from other financing methods in that it usually has priority over existing debt, equity, and other claims.
KEY TAKEAWAYS
- Debtor-in-possession (DIP) financing is financing for firms in Chapter 11 bankruptcy that allows them to continue operating.
- The lenders of DIP financing take a senior position on liens of the firm's assets, ahead of previous lenders.
- Lenders permit DIP financing as it allows a firm to continue operations, reorganize, and eventually pay off debts.
- Term loans are the most common type of financing provided whereas historically it used to be revolving loans.
Understanding Debtor-in-Possession (DIP) Financing
Since Chapter 11 favors corporate reorganization over liquidation, filing for protection can offer a vital lifeline to distressed companies in need of financing. In debtor-in-possession (DIP) financing, the court must approve the financing plan consistent with the protection granted to the business. Oversight of the loan by the lender is also subject to the court's approval and protection. If the financing is approved, the business will have the liquidity it needs to keep operating.
When a company is able to secure DIP financing, it lets vendors, suppliers, and customers know that the debtor will be able to remain in business, provide services, and make payments for goods and services during its reorganization. If the lender has found that the company is worthy of credit after examining its finances, it stands to reason that the marketplace will come to the same conclusion.
As part of the Great Recession, two bankrupt U.S. automakers, General Motors and Chrysler, were the beneficiaries of debtor-in-possession (DIP) financing.