Excerpt from Practical Guidance

Understanding Exit Financing

Law360, New York (March 26, 2014, 3:31 PM EDT) -- Obtaining exit financing to support the transaction is one of the keys to success for any plan of reorganization, and ultimately, for the entire Chapter 11 filing.

Exit financing has many purposes, including 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 prepetition debt...

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