Compare
| 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 |
Key point
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.
Try it
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.
Check-in
A DIP loan pays SOFR + 800 bps with super-priority status. Is this risky?
Key insight
Check-in
DIP (Debtor-in-Possession) financing: who lends to a bankrupt company?
Check your understanding
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: