Vision Industries Corp. (fka VIICQ)

[benjo]

DIP shown to be good for stocks:

http://www.london.edu/facultyandresearch/research/docs/294.doc

Dhillon et al. (1996) used a sample of 25 firms with debtor-in-possession financing and 80 firms without debtor-in-possession financing that filed for Chapter 11 during the period of January 1990 to December 1993 and showed the signalling role of this new financing. The announcement of debtor-in-possession financing is associated with positive abnormal returns on equity securities and positive (weak evidence) abnormal returns on debt securities. Also, firms that employ debtor-in-possession financing have more successfully reorganisations - higher percentage of firms emerging successfully from Chapter 11 and higher ex-post EBIDT (Earnings Before Interest, Depreciation and Taxes) as a proportion of total assets and sales.

Chatterjee et al. (1998) examined a sample of 55 publicly traded firms that filed for Chapter 11 from January 1990 to December 1995 and received approval for DIP financing. Their results support the benefits of the certification and monitoring role provided by DIP lenders, that outweigh the high priority of DIP financing. They also show some evidence of management entrenchment. DIP financing is associated with a positive stock and bond price response, which may suggest the absence of wealth transfers from pre-petition creditors to high priority DIP lenders. They found that most firms that obtained DIP financing are not in economic distress. When compared to bankrupt firms without new financing, DIP firms show a significant larger probability of successfully emerging from Chapter 11 and not being involved in posterior filings.