cram down

cram down

Relating to a business deal in which a group of investors is forced to accept an undesirable arrangement. For example, minority shareholders of a company being bought out may have to accept less than what they consider a fair price for their stock.

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Cram Down

To force an investor to accept a deal he/she considers unfair. For example, in a hostile takeover, some shareholders may be forced to accept junk bonds instead of cash in exchange for their stock. Likewise, in an uncovered option, the writer may be forced to purchase the underlying asset at a price that is far away from the prevailing market price. Usually, cramming down occurs when an investor is legally obliged to accept a deal, or when not taking the deal would result in an even greater loss.

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cram down

A bankruptcy tool used by debtors to force creditors to agree to a plan of reorganization in Chapter 11.If the requisite minimum number of votes have been obtained to approve a plan of reorganization, and if the plan provides better protections or payments to the nonconsenting creditors than they would receive in a liquidation,then the court may “cram down”the plan and all will be bound by its terms.