Floating Lien


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Floating Lien

A security interest retained in collateral even when the collateral changes in character, classification, or location. An inventory loan in which the lender receives a security interest or general claim on all of a company's inventory. A security interest under which the borrower pledges security for present and future advances.

References in periodicals archive ?
An American floating lien attaches to "any identifiable proceeds of [the] collateral." (282) Thus, if an American debtor sells inventory in the ordinary course of business on credit, the floating lien does not continue in the inventory, but does attach to the accounts receivable thus created.
Paramount's reclamation rights were rendered valueless because the goods subject to Paramount's reclamation demand were encumbered by Circuit City's pre-petition lenders' floating lien on inventory on the petition date.
As such, the consignor would have priority over creditors holding prior floating liens in the consignee's inventory, including the consigned goods, if the consignor satisfies all of the purchase money security interest requirements contained in UCC Section 9-324.
One line of cases holds that as long as a reclaiming seller satisfies the state law and bankruptcy requirements for reclamation, the seller is automatically entitled to either an administrative expense claim or a replacement lien in the amount of its allowed reclamation claim, notwithstanding the existence of a secured creditor with a floating lien in the debtor's inventory.
Dairy Mart's reclamation creditors are subordinate to the pre-petition floating lien secured lenders.
Trade creditors know the difficulty of collecting theft reclamation claims, particularly where the debtor has a secured lender with a floating lien in all of the debtor's present and future inventory.