Introducing The Parties To A DIP Financing

Inherent in any debtor-in-possession financing is more complexity than a simple loan from a lender to a borrower. Numerous parties may be involved, each with different roles and interests.

BORROWER/DEBTOR

The borrower under a DIP loan is typically a "debtor-in-possession" under Chapter 11 of the Bankruptcy Code, unless the bankruptcy court has appointed a trustee to oversee the administration of the debtor's assets. 11 U.S.C. § 1101(1). However, even in the case of a trustee appointment, the named borrower under the loan documents technically will remain a debtor entity (even though such entity shall be under the control and direction of the trustee). It should be noted that, notwithstanding 11 U.S.C. § 1501 et al., only a person that resides or has a domicile, a place of business, or property in the United States, or a municipality, may be a debtor under title 11. 11 U.S.C. § 109(a).