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What is debtor-in-possession (DIP) financing?

Debtor-in-possession (DIP) financing is funding offered by banks to distressed firms in a Chapter 11 style-reorganization in order to finance the operations during the restructurin…


What is debt subordination?

Debt can be contractually and/or structurally subordinated.  Subordination is usually contractual and is essentially the purpose of intercreditor and subordination agreements.  Con…


What is debt seniority?

Senior debt is a financial obligation that is not subordinated to other debt of the borrower, it ranking ahead of other secured debt, unsecured debt and subordinated debt with rega…


What is debt restructuring?

Debt restructuring is a process by which a company that is facing cash flow problems and financial distress attempts to reduce and renegotiate its delinquent debts in order to rest…


What is credit scoring?

The process of determining the creditworthiness and forecasting future performance of existing or prospective consumer or small business (SME) borrowers or lessees through the use…


What is credit risk and credit risk management (CRM)?

Credit risk is the possibility of financial loss of a creditor (lender, lessor) arising from the failure of a debtor (e.g., borrower, lessee) to meet its financial obligation to pa…


What is credit analysis?

Credit analysis is any process used for assessing the credit quality of a party through the analytical study of financial statements and other data, including payment history, repu…


What is cost?

The amount of cash or other asset paid or to be paid for the acquisition of a good, service or other future economic benefit or the incurring of a loss is a cost.  Costs that are c…


What is consolidation?

Consolidation the presentation of a parent company and its subsidiaries (affiliates) as one entity in the financial statements of the parent essentially as if the company group wer…


What is conservatism?

Conservatism is an accounting convention requiring that when different valuation methods are available, the alternative having the least favorable immediate financial impact must b…


What is collateral?

Collateral is personal or real property that is pledged or title to which has been assigned to secure the satisfaction of an obligation.  Although the use of assets to secure lendi…


What is cash flow statement analysis?

Cash flow statement analysis is used to determine the flow of cash into and out of a company and its ability to generate cash and cash equivalents, the timing and certainty of thei…


What is cash and cash equivalents?

Cash, which is the most liquid asset, includes all cash on hand (i.e., coins, bank notes, personal checks, bank drafts and cashier’s checks) and all of the firm’s cash on demand de…


What is capital stock?

A company’s authorized capital stock is the maximum number of shares of each class of capital stock that a company is legally permitted to issue, as authorized by the appropriate a…


What is big-ticket leasing?

Big-ticket leasing involves the lease financing of low-volume, high-value assets, such as aircraft, ships, telecommunications equipment and large industrial plants, arranged under…


What is bankruptcy?

Bankruptcy is a nontechnical term for a legal state of insolvency.  Any action that makes an individual or entity liable to be proceeded against involuntarily as a bankrupt or for…


What is balance sheet analysis?

Balance sheet analysis is the evaluation of the structure of a company’s balance sheet and the nature and value of its assets, liabilities and equity, typically over two or more ac…


What is automated underwriting?

Advances in computer technology and increasing information about credit risk have improved credit modelling techniques and led to automated underwriting and credit-scoring systems….


What is asset impairment and an impairment loss?

An impairment is a permanent reduction in the carrying value of an asset below its fair value (US GAAP) or recoverable amount (IFRS), which occurs when it is deemed improbable that…


What is asset amortization?

By means of amortization, a limited-life asset’s value is reduced as a result of the passage of time or its use in the production of goods and services through the allocation of it…


What is an undivided trust interest? What is a SUBI?

The beneficial interest in the vehicles and leases that have not yet been securitized is an undivided trust interest (UTI), which represents the right to receive all the proceeds o…


What is an SNDA agreement? What is privity of contract?

A subordination, non-disturbance and attornment agreement (SNDA agreement) is employed by a landlord, tenant and the lender to resolve how and when the rights of tenants will be su…


What is an outright assignment?

Outright assignment is the nonrecourse true sale of a lease in which legal title and the risks, rewards and control under an existing lease or lease commitment are transferred from…


What is an open-end lease? What is a closed-end lease? What is a TRAC lease?

A closed-end lease does not contain a purchase or renewal option, it requiring the lessor to take possession of the asset at the end of the lease term, thereby exposing the lessor…


What is an independent lessor?

An independent lessor is a leasing company that is not an affiliate, joint venture or associate of a bank, manufacturer or dealer.  They purchase equipment from various unrelated m…


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