See also Samuel Spring, "Upset Prices in Corporate Reorganizations," 493; Joseph Weiner, "Conflicting Functions of the Upset Price in a Corporate Reorganization," 137; Arthur S.
A hypothetical example can clarify how the imposition of upset prices could solve the hold-out problem and motivate junior claimants to invest in the reorganized railroad.
Upset prices could reflect scrap values, on-going value, a purely "nominal value," or the "highest figure which will permit the reorganization to succeed."(38) In practice, courts leaned toward low upset values.(39) Weiner reports evidence that upset values typically ranged from 10% to 80% of the traded market value of the claims.(40) Thus, low upset values probably played a key role in forcing junior claimants to accept the terms of reorganization plans, as they gave all parties strong incentives to make the voluntary plan work.
Thus, in many cases reorganization committees may have been able to influence the courts in the setting of upset prices. By encouraging the courts to set lower upset values, they could all but force the railroad's investors to the negotiation table.
25 Samuel Spring, "Upset Prices in Corporate Reorganizations," Harvard Law Review 32 (March 1919): 500.