If it was necessary to provide urgently needed cash (or liquidity) to enable the business of an insolvent corporate borrower to survive, how could a financier who was willing to provide this “new money” be protected and given priority over other existing creditors?

A lender who is willing to provide urgently needed liquidity to an insolvent corporate borrower can only be given priority over other existing creditors in one of two ways:

(i) With regard to existing assets, other creditors will have to agree that the new financier will have a security interest over such assets and if such assets were already secured, the secured creditor(s) will have to agree to yield their rights to such security or transfer their security interests to the new financier.

(ii) If new assets are being purchased, the financier could take a security interest in such assets, with the approval of the Commercial Court.