A Loan Trader's Guide To Reorganization Equity

Law360, New York (March 14, 2011, 2:12 PM EDT) -- The trading rules and conventions of the loan market are well known to its participants. Similarly, the laws and practices governing equity securities trading in the U.S. are quite familiar to securities market professionals. The opportunity for confusion may arise, however, when these two markets quickly converge — for example, when the loans of a reorganized borrower are converted into or satisfied by the issuance of equity securities.

Today, because “exit financing” or other capital for distressed borrowers is scarce, the reorganization and restructuring of borrowers...
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