Explain the concept of 'new money' and super-seniority in a restructuring.
A core Restructuring interview question — asked in analyst and associate interviews across IB, PE, and the Big 4.
THE SHORT ANSWER
New money is fresh financing injected to fund the restructuring itself — bridging liquidity, advisory and social-plan costs, and working capital. Because no one lends to a distressed company without protection, new money is typically granted priority ahead of the existing debt (super-senior) in the security and payment waterfall, often as a new RCF or term loan with first-priority security; existing lenders consent because their recovery is higher with the rescue than in a disorderly insolvency. On the legal basis in Germany: unlike US Chapter 11's broad DIP-priming regime, German law has no general statutory super-priority. New financing taken during proceedings can rank as a Masseverbindlichkeit (estate liability, paid ahead of ordinary insolvency creditors), and within an Insolvenzplan §264 InsO permits a defined, capped credit framework whose lenders rank ahead of the plan creditors — but it is specific and limited, not a blanket super-priority. Out of court, priority is created contractually via an amended intercreditor agreement.
WHAT INTERVIEWERS LISTEN FOR
- ✓New money = fresh financing to fund the restructuring/liquidity
- ✓Granted priority (super-senior) because lenders demand protection; incumbents consent vs worse insolvency recovery
- ✓Germany has no broad DIP-priming; new money can be a Masseverbindlichkeit
- ✓§264 InsO allows a capped priority credit framework within an Insolvenzplan (specific, not blanket); out-of-court priority via intercreditor
COMMON MISTAKES
- ✗Claiming a blanket statutory super-priority exists in Germany like US DIP
- ✗Ignoring priority over existing senior debt
- ✗Confusing the Insolvenzplan §264 credit framework with general super-priority
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