Super Priority Loan
Capital Underwriters Fund makes Super Priority Loans to Debtors in Chapter 11.
Congress created special provisions in the Bankruptcy Code, which allow lenders
to take a first lien position ahead of existing lien holders. Such financing is
referred to as superpriority financing.
Superpriority financing has a serious impact
on existing lien holders since it "primes" their liens and, essentially, displaces
them. Procedurally,
superpriority financing can be obtained with court approval after notice and
a hearing.
Capital Restructure Group undewrwrites these loans for Capital Underwriters
Fund, incorporates the commitment into the court papers and files the loan
commitment with the court.
In order for the court to consider a Superpriority loan, the debtor-in-possession
(the property owner) must demonstrate that it is unable to obtain
financing on an unsecured or junior lien basis. To fulfill this first requirement,
the court typically requires the debtor-in-posession to demonstrate that it was unable
to obtain the desired credit on terms not requiring a senior lien, that the credit
transaction was necessary to preserve assets of the estate, and that the terms of
the transaction are fair, reasonable, and adequate under the circumstances. While
the debtor-in-possession is not required to seek credit from every possible lender,
it must make a good faith effort to seek credit on terms other than a superpriority
basis.The debtor-in-possession must also show that there is adequate protection
(typically a 15% to 20% equity cushion) of the original lien holders' interests.
Capital Restructure Group brings a team of experts to the table who provide
declarations to the court to satisfy these requirements.