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DIP Financing
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In Canada, DIP financing refers to the debtor giving priority ranking security on assets to finance its ongoing operations during a restructuring. Unlike the U.S., there is no statutory basis such as a formal Chapter 11 proceeding for DIP financing in Canada. A company has to make an application to the court and the court has the jurisdiction to decide whether a DIP financing will be granted. Each application is made independently and is decided on a case-by-case basis. Generally, applications for DIP financing are made to the court while a company is undergoing a reorganization under the Company Creditors Arrangement Act (CCAA} |
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Any DIP loan by a IDC Financial will be conditional on obtaining a court ordered first priority charge on all of the property of the debtor. If priority is not provided, no loan will be made. IDC will also want to be assured that new value will be generated from DIP financing to ensure its return on investment. |
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