medium · Corporate Credit Analysis distressed
In the context of 'adequate protection' for a primed secured lender, what does the term 'indubitable equivalent' imply?
- The DIP financing interest rate is contractually fixed to exactly match the pre-petition facility's rate.
- The lender must receive an immediate cash payment exactly equal to the full par value of its secured claim amount.
- The protection provided must be so robust that there is no reasonable doubt the lender's economic position is preserved.
- The lender instead receives equity in the reorganized parent company deemed fully 'equivalent' in value to their original bond position.
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