Primed

DEFINITION of 'Primed'

The act of granting a new lender a higher claims priority over a current secured debt holder. A lender is considered primed when they are surpassed on the priority ladder for a borrower's assets.

BREAKING DOWN 'Primed'

A lender may agree to being primed if they feel the new loan can prevent bankruptcy in the company or help increase its financial stability. For example, a company files bankruptcy, but is operating as a debtor in possession. If the firm is offered DIP financing, where a new lender gives the ailing company additional funding, its current lenders would usually be primed to the new lender. The current debt holders might agree to being primed if they believe the new funds will allow the company to recover. In this case, the company would have a better chance at paying off all of its debts in the future.

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