Cram Up

Demystifying Cram Ups: Understanding the Ins and Outs

Discover the intricate workings of cram ups, a significant aspect of bankruptcy and reorganization proceedings. Explore the definitions, mechanisms, types, and historical context of cram ups, shedding light on their impact on creditors and debtors alike.

Unveiling the Concept of Cram Ups

Key Insights:

1. Definition and Scope: Gain insights into the concept of cram ups, where junior creditors exert control over senior creditors during bankruptcy or reorganization processes.
2. Legal Framework: Understand the legal provisions and rulings, such as those outlined in Section 1129(b) of the Bankruptcy Code, that govern cram ups and related proceedings.

The Dynamics of Cram Up Mechanisms

Operational Details:

1. Reverse Cramdown: Explore how cram ups operate as a reverse form of cramdown, with junior creditors imposing reorganization terms on other creditor classes.
2. Asset Sale vs. Restructuring: Compare the strategies employed by senior secured creditors, such as asset sales and renegotiation of terms, against cram up reorganization plans pursued by junior creditors.

Exploring Types of Cram Ups

Methodological Variations:

1. Reinstatement: Delve into the reinstatement method of cram ups, where debt maturity remains unchanged, and defaulted debt is cured while compensating lenders for damages.
2. Indubitable Equivalent: Learn about the indubitable equivalent approach, involving cash payments to creditors while maintaining their liens, posing challenges for post-restructuring operations.

Tracing the Evolution of Cram Ups

Historical Insights:

1. Post-Recession Dynamics: Examine the surge in cram up activities following the Great Recession, driven by companies' efforts to deleverage and reinstate favorable loans.
2. Landmark Cases: Explore real-life examples, such as the Chapter 11 proceedings of Charter Communications in 2009, which provided legal precedent and support for cram up strategies.