Bankruptcy Financing

Posted in Finance, Accounting and Economics Terms, Total Reads: 1252

Definition: Bankruptcy Financing

When financing activities are performed by a company that is currently under chapter 11 of bankruptcy it is known as bankruptcy financing. The financing activities could be in the form of debt. The main motive is to bring company out of bankruptcy.

Bankruptcy Financing is characterized by higher values of risk and interest rates.

It is also referred to as “debtor in possession (DIP) financing”. Here the lender runs a high risk of credit defaulting but can be very profitable to lend money to companies that need money so badly.

This debt is consider senior to any other debt , liability , equity or any other security issues by the company.

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