The ability of a bankruptcy trustee or chapter 11 debtor-in-possession (“DIP”) to obtain financing may be crucial to the success of a chapter 11 case as a means of funding operations or distributions under a plan of reorganization. As demonstrated by a ruling handed down by the U.S. Bankruptcy Court for the Southern District of New York, such financing may also be necessary and appropriate to finance litigation that can generate value for the bankruptcy estate, even if the financing is provided by corporate “insiders” of the debtor and must therefore be subjected to heightened scrutiny.
Source: New York Bankruptcy Court Approves Insider DIP Litigation Financing