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Unconventional wisdom argues that a rise in debtor-in-possession financing, which occurred in dramatic fashion in 2009, is actually a very profitable flight to safety for lenders. After all, DIPs rarely blow up, and the lender goes to the head of the creditor line, getting paid handsome fees and copious interest for very limited downside.

But no such safety net exists for exit lenders. They are in the same boat as prepetition lenders -- they make a loan and hope the ex-debtor is up to the task of paying it back. And yet exit lenders did that with aplomb in 2010 -- it was the best year for such financing ever -- meaning they aren't afraid to take the risk, so long as they find a way to mitigate it, which they are increasingly doing.

For example, rights offerings have become bigger components of exit financings. According to The Deal Pipeline, there were 21 rights offerings to fund reorganization plans in 2010 through Dec. 2, up from 14 the year before. Exit lenders will now backstop a rights offering along with providing a term loan or revolver.

So much so, in fact, that some exit financiers aren't even lending money. They're investing it. General Growth Properties Inc. raised $7.05 billion to fund its reorganization plan in 2010, with all of it either in the form of invested capital in exchange for stock or backstops of rights offerings.

Why the trend? Because rights offerings provide a company with the cash it needs to emerge from bankruptcy without adding debt to its capital structure, says Jonathan Henes of Kirkland & Ellis LLP. Lenders can thus get equity participation in the reorganized company if they have to backstop the rights offering, but often, it hasn't come to that because such issuances have been fully subscribed.

Indeed, whether it was debt or equity capital, the exit money just kept coming. There were 243 exit loan commitments worth $56.85 billion in 2010 through Dec. 2, compared with 157 worth $33.73 billion for the same period a year earlier. "Banks and other nonbank lenders have loads of excess funds to lend," says William Welnhofer, a Robert W. Baird & Co. investment banker. "The spigots are now open."

The financing situation has become so fluid that there's actually less of a need for reorganizing companies to convert debt into equity than in 2009, says Paul Leake at Jones Day.

Exiting debtors are raising billions in hybrid ways, too. Lyondell Chemical Co. financed its exit with a rainbow of loans, debt issuances and backstops. The $11.05 billion exit package consisted of a $2.25 billion first-lien issuance of 8% senior secured notes due 2017, €375 million ($495 million) in 8% senior secured notes due 2017, a $1.75 billion revolver and a $500 million term loan. Lyondell also had a $2.8 billion rights offering and issued $3.25 billion in third-lien notes.

Exit financing has always attracted lenders because in order to have a reorganization plan confirmed, a company must show that a proposal is feasible and then win creditor support for it, says Rick Antonoff at Clifford Chance LLP. Lenders thus gain confidence that the company has fixed its balance sheet and that operational issues and management problems have been worked out, making the borrower attractive, especially since all that is done under a very transparent bankruptcy process, he explains.

So as the credit markets have regenerated, exit financing for ex-debtors has thrived. Just look at its pricing. From Jan. 1, 2009, to Dec. 2, 2009, exit loan pricing averaged LIBOR plus 642.39 basis points and prime plus 494.64 basis points, according to The Deal Pipeline. This year, through Dec. 2, the averages dipped significantly, to LIBOR plus 562.8 basis points and prime plus 394.7 basis points.

"The capital markets have opened up," says David Heller at Latham & Watkins LLP. "The pricing and fees have reflected the competition to get these loans on book."

Some lawyers say it wouldn't be the unavailability of funds that damped more exit lending in the near future, but the mere fact that there will be fewer reorganizations to fund. Bankruptcy filings are ebbing, especially since banks and others continue to "amend and pretend" when it comes to problematic loans, says Jones Day's Leake.

Casting a shadow more immediately over exit lending, however, are uncertainties about Portugal, Ireland and Spain; the geopolitical risk surrounding the North Korea and South Korea standoff; and the power shift in Congress to Republican from Democrat, says Kirkland & Ellis' Henes. His advice? If you're a debtor looking for exit financing, try to borrow now.