Hedge Fund Glossary

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DIP Financing

shorthand for debtor-in-possession financing, which is financing arranged for a company for the period during which it is in the Chapter 11 reorganization process under the US Bankruptcy Code. Notably, claims for principal, interest and fees under a DIP Financing typically take Priority over all existing debt, even pre-Bankruptcy Secured Debt. As long as certain conditions are met, the Bankruptcy Code allows liens securing the DIP Financing to “prime” Liens securing the pre-Bankruptcy filing debt, in order to encourage Lenders to lend money to companies in Bankruptcy.

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