2002 • Volume 27 • Number 3

Postpetition Financing of Dot-Coms

Scott D. Cousins 

The recent flow and ebb of the economy–precipitated by the boom and bust of the dot-corn industry–raises some complex reorganization issues for ailing dot-com companies. The reason for this is attributable in part to the intangible nature of a dot-corn’s assets, of which valuation in the context of debtor in possession financing can become very challenging. Dot-coms are potentially vulnerable in the context of a Chapter 11 proceeding given their need for cash to maintain operations to either keep the business alive or to sell the business or assets as a going concern-where they will be most valuable.

Creditors’ interests also muddy up the waters in a dot-corn Chapter 11 proceeding. How can a court ensure that the creditor is adequately protected when the valuation of intangible assets as collateral is concerned? Creditors also need to be aware of the need to perfect their security interests in the assets. Perfection in this context may be complicated by the changing nature of the website which may be deemed new property–requiring additional steps by the creditor in order to preserve its interests.