How to Calculate the Distribution Due on a Claim Subordinated to Equity Level?

March 21, 2017

The U.S. Bankruptcy Code specifically provides that certain claims arising from the purchase or sale of common stock of the debtor shall have the same priority as common stock. Since in many bankruptcy cases common equity holders receive no distribution, the question of how to value and treat such subordinated claims is theoretical. The authors of this article explain a recent decision in which common shareholders were entitled to distribution.

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