hard · Corporate Credit Analysis distressed
In a 'Defensive DIP' provided by pre-petition lenders, a 'Rollup' of pre-petition debt into the DIP is often controversial because:
- It requires the company to pay all of the accrued interest in cash immediately the DIP is approved
- It effectively immunizes the pre-petition debt from being challenged as a fraudulent transfer or preference.
- It allows the debtor to cancel all of its existing common stock without holding any shareholder vote
- It forces the company toward an outright liquidation rather than pursuing a confirmable plan of full reorganization
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