Capital Underwriters Fund makes Super Priority Loans to Debtors in Chapter 11.
Congress created special provisions in the Bankruptcy Code, which allow lenders to take a first lien position ahead of existing lien holders. Such financing is referred to as superpriority financing.
Superpriority financing has a serious impact on existing lien holders since it “primes” their liens and, essentially, displaces them. Procedurally, superpriority financing can be obtained with court approval after notice and a hearing.
Capital Restructure Group undewrwrites these loans for Capital Underwriters Fund, incorporates the commitment into the court papers and files the loan commitment with the court.
In order for the court to consider a Superpriority loan, the debtor-in-possession (the property owner) must demonstrate that it is unable to obtain financing on an unsecured or junior lien basis. To fulfill this first requirement, the court typically requires the debtor-in-posession to demonstrate that it was unable to obtain the desired credit on terms not requiring a senior lien, that the credit transaction was necessary to preserve assets of the estate, and that the terms of the transaction are fair, reasonable, and adequate under the circumstances. While the debtor-in-possession is not required to seek credit from every possible lender, it must make a good faith effort to seek credit on terms other than a superpriority basis.The debtor-in-possession must also show that there is adequate protection (typically a 15% to 20% equity cushion) of the original lien holders’ interests.
Capital Restructure Group brings a team of experts to the table who provide declarations to the court to satisfy these requirements.
Categorised in: Case Studies
This post was written by chbfidd1