Module 4 · Chapter 9

Cross-Class Cram Down and Sanction of the Plan

A plan binds its creditors only once the court sanctions it. This chapter shows what the court checks, and when it may bind a class that voted no.

≈ 9 min read 8-question test

In this chapter

  • What the court checks before it sanctions a plan
  • The two conditions for binding a class that voted no
  • How the court tests whether the plan shares its gains fairly

9.1Sanction and cram down in one paragraph

Valkenrade, the Dutch parent of a cold-storage group, put its restructuring plan to two classes of creditors: the bank and the noteholders. The bank voted for it. A fund holding a third of the Notes voted no, so the noteholders fell short of the majority they needed.

Through cross-class cram down, the court can still sanction the plan and bind the class that said no, relying on the other class’s yes. First it must be sure the plan is fair.

Key point

The court can bind a class that votes no. It must first be sure that the class is no worse off and that the plan is fair.

Also in this chapter

  1. What the court checks before it sanctions
  2. How the court binds a class that voted no
  3. Whether the plan shares its gains fairly
  4. The fund’s challenge at the sanction hearing
  5. Your job

Preview

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