The Scope of Indemnification In DIP Financing Agreements

In filing for bankruptcy, one of the most important decisions a debtor makes is with regard to debtor-in-possession (“DIP”) financing.  Typically, a debtor negotiates with its pre-petition lender who then finances the Chapter 11 case.  In return, the lender is granted certain protections from the debtor ranging from superpriority administrative expenses to adequate protection replacement liens to indemnification of the lender under certain circumstances.

In this article, which appeared in the April 2013 edition of LJN’s Equipment Leasing Newsletter, Elizabeth Janczak an associate in Freeborn’s Bankruptcy and Financial Restructuring Practice Group, examines the typical DIP financing indemnification provision, and examines the effect of pre-petition indemnifications on the bankruptcy estate.