The Creditors Bargain and Option-Preservation Priority in Chapte
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The Creditors Bargain and Option-Preservation Priority in Chapte
University of Chicago Law SchoolChicago UnboundJournal ArticlesFaculty Scholarship2011The Creditors' Bargain and Option-Preservation Priority in Chapt The Creditors Bargain and Option-Preservation Priority in Chapteter 11Anthony CaseyFollow this and additional works at: https://chicagounbound.uchicago.edu/journal_articles0“ Part of the Law CommonsRecommended CitationAnthony Casey, 'The Creditors Bargain and Option-Preservation Priority in Chapter 11." 78 University of Chicago Law Review 759 (2011).This Article The Creditors Bargain and Option-Preservation Priority in Chapte is brought to you for free and open access by the Faculty Scholarship at Chicago Unbound. It has been accepted for inclusion in Journal Articles by aThe Creditors Bargain and Option-Preservation Priority in Chapte
n authorized administrator of Chicago Unbound. For more information, please contact unbound® lav/, uchicago eduThe University of Chicago Law ReviewVolUniversity of Chicago Law SchoolChicago UnboundJournal ArticlesFaculty Scholarship2011The Creditors' Bargain and Option-Preservation Priority in Chapt The Creditors Bargain and Option-Preservation Priority in ChapteCaseyiCorporate reorganization under Chapter 11 of the Bankruptcy Code is built on the foundation of the absolute priority rule, which requires that senior creditors be paid in full before any value can be distributed to junior credừors The standard law and economics understanding is that absolute p The Creditors Bargain and Option-Preservation Priority in Chapteriority follows inevitably from the “creditors’ bargain" model That model tells us that the optimal system of reorganization must respect nonbankruptcThe Creditors Bargain and Option-Preservation Priority in Chapte
y contract rights while maximizing the expected value of assets in bankruptcy. The conventional wisdom IS that absolute priority fits this bill as theUniversity of Chicago Law SchoolChicago UnboundJournal ArticlesFaculty Scholarship2011The Creditors' Bargain and Option-Preservation Priority in Chapt The Creditors Bargain and Option-Preservation Priority in Chapteof corporate debt suggests that it is Junior creditors issue debt supported by the residual value of the debtor firm. The repayment of that debt is contingent on the future value of the firm: the junior creditors receive any future value that exceeds the face value of the senior debt. It is well rec The Creditors Bargain and Option-Preservation Priority in Chapteognized that this right is the equivalent of a call option on thet Assistant Professor of Law,The University of Chicago Law School.1thank Daniel AbcbeThe Creditors Bargain and Option-Preservation Priority in Chapte
, Barry E. Adler, Kenneth Ayotte, Adam B Badawi, Douglas G Baud, Omri Ben-Shahar, Erin M. Casey. Stephen Choi, Lee Anne Fennell, Joseph A. Gnmdfest, MUniversity of Chicago Law SchoolChicago UnboundJournal ArticlesFaculty Scholarship2011The Creditors' Bargain and Option-Preservation Priority in Chapt The Creditors Bargain and Option-Preservation Priority in Chapteichaels, Anthony Niblclt. Randal G Picker, Eric Posner, Robert K. Rasmussen. Andres Sawicki, Naomi Schoenbaum. Julia Simon-Kerr, Richard Squire, Lior Strahilcvitz, Matthew Tokson. George G. Triantis, Noah Zatz, participants at the Annual Meeting of the American Law and Economics Association, partici The Creditors Bargain and Option-Preservation Priority in Chaptepants at the Annual Meeting of the Midwestern Law and Economics Association, participants at the University of Chicago Law School Faculty Works-in-ProThe Creditors Bargain and Option-Preservation Priority in Chapte
grcss Workshop, participants at the University of Southern California Center in Law, Economics, and Organization Workshop, and the faculties of ColumbUniversity of Chicago Law SchoolChicago UnboundJournal ArticlesFaculty Scholarship2011The Creditors' Bargain and Option-Preservation Priority in Chapt The Creditors Bargain and Option-Preservation Priority in Chapteiversity of California Irvine School of Law, the University of Chicago Law School, University of Colorado Law Schoo), University of Georgia Law School, the University of Minnesota Law School, and Vanderbilt University Law School for helpful comments and discussion.759HeinOnline - 78 Ư. Chi. L. Rev. The Creditors Bargain and Option-Preservation Priority in Chapte759 2011760The University of Chicago Law Review[78:759firm’s assets. And yet Chapter 11 destroys the value of that call option by collapsing all futurThe Creditors Bargain and Option-Preservation Priority in Chapte
e possibilities to present-day value.Thus, absolute priority eliminates the nonbankruptcy contract rights of junior creditors and creates new rights iUniversity of Chicago Law SchoolChicago UnboundJournal ArticlesFaculty Scholarship2011The Creditors' Bargain and Option-Preservation Priority in Chapt The Creditors Bargain and Option-Preservation Priority in Chapteditors’ call-option value and the senior creditors’ nonbankruptcy contract rights. This mechanism —which Ỉ call Option-Preservation Priority—is shown to protect the nonbankruptcy contract rights of all creditors and maximize the expected value of assets in bankruptcy.Introduction.................... The Creditors Bargain and Option-Preservation Priority in Chapte.................................... 760I.The Privileged Status of the Absolute Priority Rule.....-...........768II.Nonbankruptcy Rights...........The Creditors Bargain and Option-Preservation Priority in Chapte
.....................................770III.The Creditors' Bargain ................................-.... ......778A.Modigliani-Miller.................University of Chicago Law SchoolChicago UnboundJournal ArticlesFaculty Scholarship2011The Creditors' Bargain and Option-Preservation Priority in Chapt The Creditors Bargain and Option-Preservation Priority in Chapte.................. 784University of Chicago Law SchoolChicago UnboundJournal ArticlesFaculty Scholarship2011The Creditors' Bargain and Option-Preservation Priority in ChaptGọi ngay
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