Cram down

Cram down

A cram down or cramdown is the involuntary imposition by a court of a reorganization plan over the objection of some classes of creditors.[1]

Contents

Home mortgage loans

While typically used in a corporate context, the phrase has gained currency in a personal context the financial crisis of 2007-2009.

Under current United States law, bankruptcy courts are not allowed to perform cram downs (i.e., reduce the principal amount or change the interest rate or other terms) on creditors who hold loans secured by mortgages on the debtor's primary residences. As a potential solution to the subprime mortgage crisis, legislators and consumer advocates have advanced a proposal to allow cram downs on these loans, and legislation to that effect was introduced for potential inclusion in the Emergency Economic Stabilization Act of 2008.[2]

However, the financial industry strongly voiced opposition to such a measure, claiming that it would create additional uncertainty as to the value of mortgage loans (and by extension, the collateralized debt obligations into which they are bundled). While the provision ultimately was not included in the bill passed into law, the concept still has advocates and new legislation allowing for first-mortgage cram downs may appear in the future.

Informal use

The term (sometimes used in the phrase cram-down deal) has also gained currency to denote informally any transaction where existing investors (debt or equity) are forced by circumstance to accept an unappealing transaction, such as an expensive financing, a debt transaction that subordinates them, a dilutive equity raising, or an acquisition at an unappealingly low price.[3][4]

References

Further reading


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Look at other dictionaries:

  • cram down — England, Wales Occurs when a minority group of creditors or shareholders becomes bound by a restructuring which they have rejected but which the majority of creditors or shareholders have approved. A scheme of arrangement can be used to cram down …   Law dictionary

  • Cram-Down Deal — 1. A situation in which a creditor is forced to accept undesirable terms imposed by a court during a bankruptcy or reorganization. 2. A merger or acquisition with unfavorable terms, in which shareholders or debtors of the target company are… …   Investment dictionary

  • cram down — An informal name for a settlement or terms that a debtor forces creditors to accept. For example, a debtor in Chapter 11 bankruptcy proceedings can, subject to some restrictions, have a plan to resolve the bankruptcy approved by the court even… …   Financial and business terms

  • cram down — In bankruptcy, colloquial expression that describes court confirmation of a Bankruptcy Code Chapter 11, 12 or 13 plan, notwithstanding creditor opposition. Matter of U.S. Truck Co., Inc., Bkrtcy.Mich., 47 B.R. 932, 935 …   Black's law dictionary

  • cram down — In bankruptcy, colloquial expression that describes court confirmation of a Bankruptcy Code Chapter 11, 12 or 13 plan, notwithstanding creditor opposition. Matter of U.S. Truck Co., Inc., Bkrtcy.Mich., 47 B.R. 932, 935 …   Black's law dictionary

  • cram-down deal — A merger in which stockholders are forced to accept undesirable terms, such as junk bonds instead of cash or equity, due to the absence of any better alternatives. Bloomberg Financial Dictionary …   Financial and business terms

  • cram down one's throat — stuff or force in one s mouth …   English contemporary dictionary

  • Cram-Up — A situation in which junior classes of creditors impose a cram down on senior classes of creditors during a bankruptcy or reorganization. In a cram up a company facing bankruptcy cannot force creditors to accept compromises to their claims… …   Investment dictionary

  • cram´mer — cram «kram», verb, crammed, cram|ming, noun. –v.t. 1. to force into; force down; stuff: »He crammed as many candy bars into his pockets as they would hold. I crammed all my clothes quickly into the bag. SYNONYM(S …   Useful english dictionary

  • Cram (game show) — Cram Genre Game show Presented by Graham Elwood Starring Berglind Icey Arturo Gil Andrea Hutchman Country of origin United States …   Wikipedia

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