In re 495 Central Avenue Corporation
United States Bankruptcy Court for the Southern District of New York
136 B.R. 626 (1992)
495 Central Avenue Corporation (debtor), having defaulted on a mortgage held by John Hancock (creditor), filed for bankruptcy, staying John Hancock's foreclosure, and as debtor in possession sought court approval to obtain renovation financing that would give the new post-petition lender a lien with priority over John Hancock's existing mortgage; the company's principals had already tried and failed to secure financing on any other terms, and expert testimony confirmed lenders wouldn't extend credit here without a priority lien.
Whether a debtor in bankruptcy may grant a post-petition lender a security interest with priority over pre-petition security interests when the debtor cannot obtain financing otherwise and the pre-petition lienholder's interest is adequately protected.