DIP financing comes to Colombia

Author: Edward Price | Published: 14 Sep 2016

In the third of a series of four stories, IFLR digs into the state of debtor-­in­-possession (DIP) financing in Latin America. 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.

DIP financing is not much used in Colombia – but local lawyers would like to see its use expanded. "It’s the exception, rather than the rule," said Ricardo Trejos Robledo, director of the banking and finance group at Baker & McKenzie in Colombia.

Instead, financing for insolvency companies most typically comes from sources such as key suppliers, potential buyers and shareholders. According to Trejos Robledo, that’s because banks generally allow for DIP financing only where companies have longstanding relationships, a catch that limits what small and medium-sized insolvent companies can expect to secure...