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Articles Tagged with reorganization plan

Charlotte Bankruptcy Lawyer Bryan W. Stone of Arnold & Smith, PLLC answers the question “Will I lose my property if I file for bankruptcy ?”

 

Bankruptcy observers say if United States Bankruptcy Judge Robert C. Drain’s August ruling in the Chapter 11 bankruptcy of Momentive Performance Materials Inc. holds up, it could dramatically alter the playing field for debtors and even junior creditors who seek to restructure debts held by senior lenders at so-called cram-down interest rates.

NYC Courthouse Charlotte Debt Lawyer North Carolina Bankruptcy AttorneyCram-down interest rates are interest rates that are considered below market value. In the Momentive bankruptcy, the debtor—Momentive—crafted a reorganization plan that would pay senior lien holders “with new long-term debt, at below-market interest rates,” according to Law 360.

The senior lien holders had an opportunity to accept a cash-out option and fight the restructuring plan, but turned it down. Momentive sought to enforce the restructuring plan, and in August, Judge Drain ruled that the senior lien holders could be paid based on the so-called “Till rate.”

The “Till rate” was formulated in a 2004 Supreme Court case that involved an individual debtor. Momentive marks the first time that the “Till rate” was adopted in a corporate Chapter 11 bankruptcy. In the Momentive case, the effect of the ruling on senior lien holders was dramatic. Immediately after the decision, the senior lien holders lost as much as $100 million in trading value on their Momentive notes.

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