Cram Ups and Uber's Competitive Advantage

Welcome to the twenty-sixth Pari Passu newsletter,

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Today, we will learn more about:

1. Cram Ups

2. Uber’s Competitive Advantage

Cram Ups

In a cram down, a bankruptcy court ignores objections from a class of creditors and approves a plan of reorganization (typically filed by the debtor). In a cram up, the roles are reversed. Instead of the bankruptcy court imposing a cramdown on the debtor's behalf against a class of creditors, junior or subordinated creditors typically force terms of a reorganization on other, more senior creditors that may be holding up the reorganization. Suppose enough junior-class creditors agree to the terms set by a company seeking refinancing. In that case, they can force holdouts to be bound to the agreement, cramming up the refinancing. Senior creditors are forced to accept the terms, even if they are not as good as the original deal or if they continue to object. For this to happen, the bankruptcy court must find that the terms of the POR are fair and equitable. Cram ups are particularly useful for junior creditors who are dealing with a secured creditor who wants a quick sale of assets to recoup their investment and end the bankruptcy process quickly. This would result in enough proceeds to satisfy their own debt, but can reduce or negate a significant recovery for junior creditors.

Indubitable Equivalent Cram Ups and Requirements

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