Within the belated standard period, nonetheless, the landscape shifted as a result of more dire economic climates. Because of this, liquidity was at far reduced supply, constraining option of old-fashioned third-party DIPs. Likewise, utilizing the serious fiscal conditions consuming away at debtorsвЂ™ collateral вЂ“ not forgetting enterprise that is reducing вЂ“ prepetition lenders had been more wary of relying entirely regarding the super-priority status of DIPs, and had been more prone to ask for priming liens to secure facilities.
The refusal of prepetition loan providers to consent to such priming, combined with cost and doubt taking part in a fight that is priming bankruptcy court, greatly paid down third-party involvement when you look at the DIP market. With liquidity an issue, brand brand new innovations in DIP lending cropped up geared towards bringing nontraditional loan providers in to the market. Included in these are:
- Junior DIPs. These facilities are usually given by relationship holders or any other unsecured debtors as an element of a loan-to-own strategy. In these deals the providers get much or most of the post-petition equity interest as a bonus to give the DIP loans.
- Roll-up DIPs. In some bankruptcies вЂ“ LyondellBasell and Spectrum Brands are two examples вЂ“ DIP providers were because of the possibility to retract prepetition claims into junior DIPs that rank in front of other prepetition guaranteed loan providers. This sweetener ended up being especially compelling for loan providers which had purchased prepetition paper at troubled rates, and could actually recognize an increase by rolling it in to the junior DIPs.