Debtor-in-Possession Financing & Cash Collateral

In Chapter 11 cases, it is common for the debtor to file a motion to use cash collateral and/or obtain post-petition or debtor-in-possession financing as part of the first day motions. These motions require close scrutiny as they typically contain terms which are favorable to the pre-petition lender and/or post-petition lender (who are often the same). These motions often seek to limit, or in some cases eliminate, the rights of other secured creditors, including holders of statutory mineral liens. In addition, the cash collateral orders typically set forth the budgeted amounts for which the debtor proposes to use cash collateral and/or post-petition financing during the bankruptcy case. These budgets should be closely analyzed to determine if there are excessive budgeted expenses, including general and administrative expenses and professional fees.

In order for the debtor to use cash collateral, either the debtor must obtain the consent of each creditor that has an interest in such cash collateral, or after notice and hearing, the court must authorize the use of cash collateral, which shall be conditioned upon the debtor providing adequate protection of such interest. Similarly, if the debtor seeks to obtain post-petition financing and grant a senior or equal lien on property of the estate to secure such financing, the court may authorize the debtor to obtain post-petition financing only if (a) the debtor is unable to obtain such credit otherwise, and (b) the debtor provides adequate protection of the interests of holders of liens on the property for which such senior lien (referred to as a "priming" lien) is proposed to be granted.

Snow Spence Green LLP has a wealth of knowledge in litigating contested cash collateral and post-petition financing motions and has been successful in both preserving our clients' rights under these types of orders and in curtailing excessive expenditures by the debtor.

Representative Experience

Below is a list were the Firm has challenged debtor's motions to use of cash collateral:

  • In re MPF Holding US LLC, Debtor; Case No. 08-36084-11; In the United States Bankruptcy Court for the Southern District of Texas, Houston Division.  Negotiated changes to DIP financing and use of cash collateral to benefit unsecured creditors. 

  • In re John H. Hamilton, Sr., Debtor; Case No. 10-35770; In the United States Bankruptcy Court for the Southern District of Texas, Houston Division.  Successfully challenged debtor’s proposed use of cash collateral and budget.

  • In re James A Whitson, Jr., d/b/a James A. Whitson, Jr. Oil Operators, Debtor; Case No. 09-34979-7; In the United States Bankruptcy Court for the Southern District of Texas, Houston Division.  Successfully challenged debtor in possession’s continued use of cash collateral and obtained appointment of trustee.

  • In re Wave Energy, Inc., Debtor; Case No. 09-34577-H2-11; In the United States Bankruptcy Court for the Southern District of Texas, Houston Division.  Successfully challenged debtor in possession’s use of cash collateral and obtained appointment of a trustee.