§ 01
| DIP Feature | Detail | Why It Matters |
|---|---|---|
| Priority | Super-priority — ahead of all pre-petition claims | First to be repaid in any outcome |
| Collateral | First lien on unencumbered assets + priming lien | Secured by the best remaining collateral |
| Pricing | SOFR + 500–1000+ bps | High yield reflecting distressed situation |
| Fees | Commitment, funding, backstop fees | Additional return beyond interest |
| Terms | Short maturity (6–18 months), tight covenants | Limits company’s flexibility |
§ 02
DIP lenders often become the most influential parties in the restructuring. Their loan terms can shape the reorganization plan, exit financing, and even the identity of the company’s new owners.
§ 03
When a bankruptcy is announced, look for the DIP financing terms in the first-day motions. The size, pricing, and lender identity reveal how the restructuring will likely proceed.
§ 04
A DIP loan pays SOFR + 800 bps with super-priority status. Is this risky?
§ 05
§ 06
DIP (Debtor-in-Possession) financing: who lends to a bankrupt company?
Five questions · AI feedback
Sit with the ideas.
A distressed fund holds $150M face value of senior secured bonds (purchased at 55 cents, so $82.5M cost basis). The fund provides a $75M DIP facility at SOFR + 800 bps with 2% OID and a full roll-up of its pre-petition bonds. What is the fund's total superpriority exposure?
Why: