medium · Corporate Credit Analysis
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 100% of the interest in cash immediately.
- It effectively immunizes the pre-petition debt from being challenged as a fraudulent transfer or preference.
- It allows the debtor to cancel all existing common stock without a vote.
- It forces the company to liquidate rather than reorganize.
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