Cramdown

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Cramdown

The ability of the bankruptcy court to confirm a plan of reorganization over the objections of some classes of creditors. This often involves resetting the amount of principal that the bond holders are owed. Related is a mortgage cramdown. Here the home owner cannot pay the mortgage because of financial distress and, indeed, the mortgage could be a higher value than the house. A cramdown resets (lower) the principal amount of the mortgage. This may allow the homeowner to stay in the house (avoid foreclosure).

Cramdown

In bankruptcy, the ability of a court to formulate and implement a Chapter 11 reorganization plan over and above the objections of creditors. Generally speaking, unsecured creditors object to a debtor's bankruptcy because they have no recourse for retrieving the debt. The rationale behind a cramdown is the fact that unsecured creditors will usually receive part of the debt back under a Chapter 11 reorganization, but would receive nothing in a Chapter 7 liquidation. Cramdown is therefore thought to be the least negative option for both the debtor and the creditors. Courts are required, however, to formulate a cramdown that is as equitable as possible for all parties.
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By cramming down the restructure on unsecured creditors, you may be able to give the trade or subordinated debt certain equity in the company to clean up the balance sheet.
The pilot groups, both of whom are represented by the Air Line Pilots Association, Int'l (ALPA), have been waiting for US Airways' [NYSE: LCC] management to put forward proposals that reflect US Airways' successful position in the industry, rather than insisting on cramming down bankruptcy- driven proposals that were put in place so that the company could survive after the post-9/11 industry downturn.
There's no suit-and-cell-phone crowd here, cramming down franchise specials while racing off to palm-pilot appointments.