  |
  |
  |
    
  
   |
 | |||
|
|
|
|
| |||
trustee.28 As noted above, Delaware's new local rule generally requires 75 days' notice to parties in interest, and 60 days' notice after a creditors' committee is formed, for the dive to be enforceable against the estate and other parties in interest.
An alternative to a complete "dive" is to provide a "cap" on the amount of cash collateral that may be used to pay for investigation of the validity and priority of the lender's liens. At least one District Court has suggested that it is within a bankruptcy court's discretion to approve such a cap.29
It is clearly permissible under § 364 for a postpetition loan to be secured by all of the debtor's assets, whether obtained pre- or postpetition. In this context "cross-collateralization" refers to extending such blanket collateralization to secure the lender's prepetition debt as well. There is no express authority for such an improvement in a postpetition lender's prepetition claim, but what should a court do when those are the only terms on which credit will be provided, and credit is essential to the debtor's survival?
Courts have debated whether such cross collateralization is permissible. It clearly cannot be approved ex parte,30 and it will require evidence and findings as to the exigent circumstances and the potential effect on other creditors.31 Some courts have held that it is not permissible.32
28 E.g., In re FCX, Inc., 54 B.R. 833, 841-41 (Bankr. E.D. N.C. 1985)("The provisions establishing the amount of the indebtedness, conceding the validity of the lien, and releasing claims are reasonable as to the debtor, but are not reasonable with respect to creditors and other parties in interest. A reasonable period of time to determine the amount and validity of the Bank's secured claim is 30 days from the date of this order. A reasonable period of time to determine the existence of claims against the Bank is 60 days.").
29 Official Comm. Of Unsecured Creditors v. New World Pasta Co., 322 B.R. 560 (M.D. Pa. 2005).
30 In re Texlon Corp., 596 F.2d 1092 (2d Cir. 1979).
31 In re Goold Electronics, 1993 U.S. Dist. LEXIS 14398 (N.D. Ill. 1993).
12
