Law360 recently consulted Dorsey Partner Michael Foreman on the topic of debtor-in-possession financing, the "latest casualty of the economic crisis."

Foreman told Law360 that the funding crisis comes at a time when Chapter 11 matters are focused on liquidating businesses quickly before perceived value dissipates. The article, "Dried-Up DIP Financing to Intensify Ch. 11 Sell-Offs," reports that the bankruptcy courts have become a "forum where creditors use litigation to gain leverage, and the emphasis is more on getting deals done than on getting them right."

Foreman remarked, "These companies can't afford the cost and time delay resulting from inter-creditor disputes, so a sale ends up being the lowest common denominator solution, and once the company is sold, creditors can fight over the proceeds...the preservation of jobs and customer or supplier relationships has become subordinate to the return on investments. You now have creditors with competing interests, which makes it a lot harder to get something done other than a sale."