Preparing for Exit Financing

Summary

This practice note discusses the process by which a debtor obtains exit financing. The debtor's ability to obtain exit financing to support its restructuring is one of the keys to success for any plan of reorganization, and ultimately, for the entire Chapter 11 case. Exit financing has many purposes, such as providing liquidity for distributions required under a plan of reorganization, refinancing existing indebtedness, and providing the funds necessary to support the post-emergence business plan. A Chapter 11 debtor can obtain commitments from lenders for exit financing by formulating a plan that calls for the reorganized debtor to issue debt or equity (or both) under the terms of the plan of reorganization. A debtor can also reinstate pre-petition debt or defer payments on pre-petition debt as an alternative means for exiting from Chapter 11.