Absolute priority rule
In Chapter 11 cramdown, a dissenting impaired unsecured class generally must receive full value on its allowed claims before junior holders receive property on account of their junior claims or interests, subject to applicable exceptions.
Absolute priority rule in round numbers
Hypothetical simplified priority waterfall: US$70m is available for distribution after assumed superior costs and claims. Senior claims of US$60m receive US$60m. Unsecured claims of US$40m receive the remaining US$10m, a 25% recovery. Equity receives zero.
Scroll horizontally to read all columns.
| Class | Claims | Distribution | Recovery |
|---|---|---|---|
| Senior | 60 | 60 | 100% |
| Unsecured | 40 | 10 | 25% |
| Equity | Not applicable | 0 | No distribution |
Source: 11 U.S.C. 1129(b).
Terms Related to Absolute priority rule
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