Exploring The New-Value Exception In Multidebtor Cases

Law360, New York (November 28, 2017, 1:04 PM EST) -- Various courts have invoked a so-called “new-value exception” to the absolute priority rule, which permits existing equity holders to retain their ownership interest in a debtor even where more senior, dissenting classes of creditors are impaired. However, there is a surprising dearth of case law addressing how the new-value exception should be applied in multidebtor bankruptcies. Multidebtor filings are common in large-scale restructurings because often the parent company and most (if not all) subsidiaries need to go through bankruptcy to deleverage the organization’s balance sheet. Given...
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