Quantifying Unwritten Side Deals In Corporate Distress Restructuring
Unwritten side deals in corporate restructurings create valuation deltas that siphon enterprise value from statutory recovery waterfalls into unrecorded claims.
cramdown thresholds
Meaning
Statutory voting standards define the minimum proportion of claims or interests required within a creditor class to bind non-consenting members to a restructuring plan. In formal insolvency proceedings, cramdown thresholds establish the specific numerical boundaries where a court can force a plan onto dissenting classes. Statutory schemes typically require acceptance by two-thirds in amount and more than half in number of voting claims.
Numerical Requirement
Numerical calculations measure participating votes rather than total outstanding debt. Reaching cramdown thresholds requires precise audit of submitted ballots and formal challenge logs. Missing the requirement by a single vote shifts the legal burden entirely onto cramdown litigation.
Impaired Approval
Restructuring statutes require at least one impaired class to accept the plan without counting insider votes. Navigating cramdown thresholds relies on securing an accepting class that holds legitimate financial exposure. Dissenting senior classes often challenge class composition when voting patterns appear engineered.
Dissent Standard
Court records must demonstrate that non-accepting classes receive value at least equal to what liquidation would yield. Meeting cramdown thresholds does not bypass the absolute priority rule, which prevents junior interest holders from retaining equity unless senior creditors are paid in full. When senior classes object, valuation testimony becomes the primary evidentiary record during confirmation hearings.