CIRA Bankruptcy & Restructuring Procedures Flashcards

What does 'DIP financing' stand for, and what is its primary purpose in a Chapter 11 case?

Answer: Debtor-in-Possession financing; provides working capital to fund operations during restructuring

DIP financing is new credit extended to a bankrupt debtor, typically with super-priority status, to ensure the business has sufficient liquidity to continue operating while it reorganizes.

An 'executory contract' in bankruptcy is best described as:

Answer: A contract where both parties still have material unperformed obligations

An executory contract is one where both the debtor and counterparty have ongoing obligations; the debtor may assume (keep) or reject (breach and treat as pre-petition claim) such contracts.

Which term describes the process by which a bankruptcy court confirms a Chapter 11 reorganization plan over the objection of a dissenting class of creditors?

Answer: Cramdown

Cramdown allows the court to confirm a plan even if a class votes against it, provided the plan satisfies statutory requirements including the absolute priority rule.

In an out-of-court restructuring, what is a 'forbearance agreement'?

Answer: A creditor's agreement to temporarily refrain from exercising remedies in exchange for concessions from the debtor

A forbearance agreement buys the distressed debtor time to negotiate a more permanent solution by having lenders agree not to accelerate loans or enforce defaults for a defined period.

Which metric in a restructuring plan indicates whether the reorganized company can realistically meet its future debt obligations?

Answer: Feasibility, demonstrated by projected cash flows sufficient to service reorganized debt

Under 11 U.S.C. § 1129(a)(11), a plan must be feasible, meaning the court must find that the reorganized company will not likely require further liquidation or reorganization.

What is the role of a 'chief restructuring officer' (CRO) in a distressed company?

Answer: To lead the operational and financial turnaround, often with authority over strategic and restructuring decisions

A CRO is typically an experienced restructuring professional brought in to stabilize operations, develop a restructuring strategy, and interface with creditors, lenders, and the court.