Insights - Key takeaways from IWIRC Singapore seminar on DIP financing

An engaging and insightful discussion at IWIRC Singapore's DIP Financing: Last Chance or Bust seminar. DHC Capital’s David Chew participated in the panel discussion together with Tan Mei Yen (Partner, Wong Partnership), Ashley Bell (Partner, DLA Piper), Michael Phillip (Director, CarVal Investors) and Stefan White (Portfolio Manager, LIM Advisors). Key takeaways from the seminar:

  • DIP financing will become an essential tool in restructuring under the amendments to Singapore’s Companies Act (Cap. 50) as it allows a debtor to fund day to day operations during a period where liquidity is tight and bridge toward either a sale of the assets or the restructuring of debt via a scheme of arrangement

  • DIP strategy and structuring will be paramount as offensive DIP lenders (i.e. DIP loans provided by a new third-party lenders) motivated by the opportunity to control the process, earn attractive returns and greater priority with the benefit of the Court’s oversight and approval compete against defensive DIP lenders (i.e. DIP loans provided by the existing secured lenders) motivated to protect the existing loan, avoid being primed and maintaining control of the process

  • Defensive strategies available to existing secured lenders to protect the existing loan include – (i) use of a roll-up DIP loan whereby the pre-filing secured debt is “rolled up” into the DIP loan by using the DIP proceeds to satisfy the pre-filing secured loan, (ii) use of cross-collateralisation to improve the collateral value for its secured interest and (iii) use of DIP loan to “clean up” pre-filing loan documents when there is ambiguity in the documents underpinning the pre-filing loan, or if there is a dispute regarding the perfection or priorities

  • Offensive DIP lenders include private equity, credit and special situation funds and strategic investors. Opportunistic angle exists for strategic investors to structure a DIP loan to gain control of the restructuring process and acquire assets out of a bankruptcy situation

  • Credit and special situation funds have “dry powder” and appetite to deploy funds for DIP loans

Special thanks to sponsor and host, Stephenson Harwood (Singapore) Alliance.

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