From the course: Construction Loan-in-Process

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Debtor-in-possession (DIP) financing

Debtor-in-possession (DIP) financing

From the course: Construction Loan-in-Process

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Debtor-in-possession (DIP) financing

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- Debtor-in-possession financing or DIP financing is a form of financing specific for projects in financial distress. Typically, DIP financing is part of formal bankruptcy proceedings like CCAA in Canada, or Chapter 11 in the United States. Usually, DIP financing takes priority over all other financing. In other words, it gets to the top of the capital stack. So, in this case, DIP financing breaks the order of priority in the capital stack. Often, the purpose of DIP financing is to keep the project going until it can be sold as a finished project if this is deemed more favorable than more of a liquidation process. If liquidation is more favorable, DIP financing may still be used because you always need some money to keep things status quo and prepare for a liquidation.

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