For example, if a counterparty received a 50 percent upfront recovery made possible by the debtor-in-possession financing, and unsecured creditors later received only 35 percent in the Chapter 14 case, the proposal would subordinate the debtor-in-possession lenders' claim by that extra 15 percent.
Peabody has secured $800m in debtor-in-possession financing from both secured and unsecured creditors, including a $500m term loan, $200m bonding accommodation facility and a letter of credit worth $100m, the company said in its release.
Peabody has secured $800 million in debtor-in-possession financing from both secured and unsecured creditors, including a $500 million term loan, $200 million bonding accommodation facility and a letter of credit worth $100 million, the company said in release.
Such payments, known as adequate protection, are common in debtor-in-possession financings, said David M. Friedman, a partner with Kasowitz, Benson, Torres & Friedman, which represents the unsecured creditors.
Homesteads in Florida, for example, are almost entirely protected from seizure by unsecured creditors (those without a lien), which is why O. J. Simpson's home there remained in his possession even after he had several judgments against him.
Write-offs on unsecured loans have also jumped sharply (see chart).Most of those declaring bankruptcy have few assets; people with significant possessions tend to lose them when they walk away from their debts and so have a powerful incentive not to do so.
You are also converting unsecured credit into secured credit, and if you don't pay your second mortgage, the lender could start possession proceedings.
Sometimes unsecured lending is optimal.
PPL Electric Utilities Corp., $800 million unsecured senior bonds.
