Debt Restructuring & Management Flashcards
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Read the first 7 Debt Restructuring & Management flashcards as text
Under a Chapter 11 plan, a class of creditors is deemed to have accepted the plan if what percentage of allowed claim amount votes in favor?
Answer: At least two-thirds
A class accepts a Chapter 11 plan if creditors holding at least two-thirds in amount and more than one-half in number of allowed claims vote in favor.
What is a 'prepackaged' bankruptcy filing?
Answer: A plan of reorganization negotiated and voted on by creditors before filing
A prepackaged bankruptcy involves soliciting and obtaining creditor votes on the reorganization plan before the bankruptcy petition is filed, reducing time in court.
In debt restructuring, what does an 'out-of-court workout' primarily aim to avoid?
Answer: Formal bankruptcy proceedings
An out-of-court workout seeks to restructure obligations through private negotiations with creditors to avoid the cost and publicity of formal bankruptcy proceedings.
Which type of debt restructuring involves exchanging existing debt for new debt instruments with different terms?
Answer: Debt exchange offer
A debt exchange offer replaces existing debt securities with new instruments that typically have modified maturities, interest rates, or principal amounts.
What is 'negative pledge' in the context of debt restructuring agreements?
Answer: A borrower's promise not to pledge assets as collateral to other lenders
A negative pledge clause contractually prohibits the borrower from encumbering its assets with liens in favor of other creditors, protecting existing unsecured lenders.
When a debtor proposes to pay unsecured creditors 60 cents on the dollar under a restructuring plan, what term describes this reduction?
Answer: Haircut
A haircut refers to the reduction in the face value of a debt that creditors agree to accept as part of a restructuring or settlement.
Under Section 1129(b) of the Bankruptcy Code, a plan can be confirmed over a dissenting class's objection if it does not 'discriminate unfairly' and is what?
Answer: Fair and equitable
Section 1129(b) allows cramdown confirmation if the plan is fair and equitable with respect to each dissenting class, meaning it satisfies the absolute priority rule.
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