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Redemption Option Value: Broad Implications for Secured Lenders

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January 5, 2015
Client Alert

As discussed in our first installment, the American Bankruptcy Institute released its Final Report and Recommendations containing proposals to modify the Bankruptcy Code, many of which will have significant and negative implications for secured creditors. One of the most far reaching of the proposals is to require, in connection with a sale of all or substantially all of the debtor’s assets or a plan of reorganization, that senior creditors provide certain out-of-the-money junior creditors or equity holders with what the Report terms the “Redemption Option Value.”

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