hard · Corporate Credit Analysis cap-structure

If a borrower enters bankruptcy, what typically happens to the junior creditor's right to provide Debtor-in-Possession (DIP) financing under a standard ICA?

1. Under a standard ICA, the senior creditor typically negotiates the contractual right to provide or approve any DIP facility ahead of the junior.
2. DIP financing that primes a senior lien still requires court approval and adequate protection; it is not an automatic wipeout of that lien.
3. The junior creditor must obtain the senior creditor's consent or ensure the DIP does not 'prime' the senior creditor's existing lien.
4. Junior creditors face no SEC-imposed bar on providing DIP financing; such limits arise purely from contract, not securities law.

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