This article examines the Saybrook decision in the context of prior case law and the general principles underlying the Code. The first section lays the foundation for an analysis of Saybrook by identifying the fundamental tenets of the Code and outlining the protections available under the Code to preserve secured creditors' property interests in their collateral and to induce lenders to provide DIPs with new credit. The next section defines cross-collateralization, analyzes the Saybrook decision in the context of prior case law, and considers whether cross-collateralization is permissible under the Code's express provisions and general policies. The authors conclude that the Code's language, history, and policies should be construed to prohibit cross-collateralization liens because such liens violate the Code's policy of equitable distribution among similarly situated creditors and are inconsistent with the provisions of the Code governing the protection of pre-petition secured creditors and the inducement of new financing. The article next considers whether and to what extent financing orders are protected from modification or reversal on appeal or in collateral proceedings, and concludes that (1) the Code's statutory mootness doctrine applicable to financing orders should be construed to protect against reversal or modification on appeal all terms of a financing order that relate directly to the new post-petition financing, unless the effect of the order has been stayed pending the appeal, but not to protect any terms that relate directly to the lender's prepetition claims, even in the absence of a stay pending appeal and (2) principles of finality, res judicata and collateral estoppel should insulate all terms of a financing order from direct or collateral attack by any party who failed to preserve its challenge by filing a timely notice of appeal. This is followed by an attempt to project Saybrook's potential precedental effects and impact on DIP financing. Finally, the authors offer a summary of their conclusions and make certain recommendations designed to guide practitioners and courts in drafting and analyzing financing orders.
2 J. Bankr. L. & Prac. 163 (1993).