October 2016
The "Devil's Dictionary" is a quick-reference guide for commercial lenders and other restructuring professionals. In this series, we highlight many of the buzz words found in the Dictionary and used in today's bankruptcy arena.

Carveout: The agreement of a lender to make advances or set aside (“carve out”) some of its collateral to pay the fees of debtor’s counsel and financial advisors, and counsel and financial advisors to a committee. The carveout is often seen as the “toll” the lender must pay to use the bankruptcy estate to obtain a more profitable liquidation of its collateral. The terms of a carveout are usually negotiated in connection with a DIP financing agreement or cash collateral order.

Bankruptcy Code § 506(c). See also Cash Collateral Order, DIP Financing Order, Surcharge. And for a very different kind of “carveout,” see Nonrecourse Carveout.

"The Devil's Dictionary" is an excellent reference tool that reflects the collective wisdom of its four authors, Brett Anders, Jim Bird, David Ferguson, and Dan Flanigan, who have a combined total of more than 110 years working in the forefront of real estate and other commercial finance, loan enforcement, financial restructuring and bankruptcy law.