Weekly News – December 8

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Debtwire Restructuring Forum Miami:

Are Double Dips in Trouble?

At the Debtwire Restructuring Forum, Judge David S. Jones (SDNY) commented on the use of the double-dip financing technique:

[Double-Dips] raises some questions about bankruptcy administration, particularly the bankruptcy system is always fundamentally focused on making sure that like situated creditors get like treatment and avoiding double payments. I think if you are a new lender participating in a double – dip, you have potentially got a non – debtor source of funding and that’s great — you may get paid fuller, faster — but as a bankruptcy court you are going to be focused on making sure that this isn’t an improper pathway to double compensation or a potentially subordinatable use of debtor assets. So, particularly you may look at the debtor guarantee directly to the new lenders and other parties in the transaction or other parties in interest in the bankruptcy might look hard to see what remedies might they have to try and break that dotted line and try to minimize the use of estate assets to compensate these new lenders who might have some other vehicle…. That’s just a quick take on what I would be worried about as a bankruptcy judge looking at this. Fundamentally make sure there’s not a double dip and make sure estate assets are actually being used for a legitimate purpose.

Watch it here at 14:23:

He added all the necessary qualifications that his comments do not represent a view on any particular case.

Our take:

Can Judge Jones (SDNY) comments be the canary in the coal mine? Are creditors now on notice that their claims could be challenged? 
Tell us what you think here

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