12 AN INTRODUCTION TO DIP FINANCING Jane Lee

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going concern, liquidation, and fair market values. In
general, when valuing collateral under section 506(a) of
the Bankruptcy Code, the appropriate method will
depend on the purpose of the valuation and of the
intended use or disposition of the collateral. 11 U.S.C.
§ 506(a); see In re Rash, 520 U.S. 953, 962 (1997)
(“the ‘proposed disposition or use’ of the collateral is of
paramount importance to the valuation question”); see
also In re Penz, 102 B.R. 826, 828 (Bankr. E.D. Okla.
1989) (explaining that “when a debtor intends to
continue use of creditor’s collateral, the debtors are
acknowledging the value of the collateral to be greater
than if liquidated [and t]herefore, creditor’s secured
claim is entitled to be valued to the extent of its
contribution to the entire estate vis-à-vis ‘going concern
value’ not a mere liquidation value”).
(iii)
Some courts are reluctant to approve an equity cushion
by itself. In re Strug-Division LLC, 380 B.R. 505, 513
(Bankr. N.D. Ill. 2008) (equity cushion alone
insufficient to provide existing lender with indubitable
equivalent), In re Stoney Creek Tech., LLC, 364 B.R.
882, 891 (Bankr. E.D. Pa. 2007) (evaluating the
following factors to determine whether a movant is
entitled to adequate protection: (i) whether the accrual
of interest erodes the equity cushion; (ii) whether the
property is depreciating or increasing in value; (iii)
whether the debtor has shown an inability to obtain refinancing
since the petition date; (iv) whether the debtor
has offered any other methods of adequate protection;
(v) whether there is a realistic prospect for successful
reorganization; and (vi) whether the debtor’s conduct in
the litigation evidences only a deliberate delaying
tactic). The size of an acceptable equity cushion may
vary widely depending on the circumstances. See In re
Campbell Sod, Inc., 378 B.R. 647, 654-55 (Bankr. D.
Kan. 2007) (where bank’s collateral was likely to