Making DIP financing work for Mexico

Author: Edward Price | Published: 8 Aug 2016

In the second of a series of four stories, IFLR digs into the state of debtor­ in ­possession (DIP) financing in Latin America, here with reference to Mexico. DIP financing is funding for a debtor which ordinarily comes in the form of secured notes or loans. It’s designed to inject liquidity and aid in covering expenses and operations during a restructuring.

Technically speaking, debtor in possession (DIP) financing is not new in Mexico. But it wasn’t until Mexico’s insolvency law – the ley de concursos mercantiles – was reformed in 2014 that a form of workable clarity on DIP was achieved.

As such, DIP financing in Mexico is only just beginning to materialise, with the recent homebuilders’ cases the most prominent to date. Challenges remain however: faced with a number of disincentives, lenders haven’t been willing to take the practice up. Compared with the more predictable US, there’s still...