Consider a firm that has three types of debt: a bank loan with the highest priority, senior debt owned by bondholders with the next highest priority, and junior debt owned by bondholders with the lowest priority. The firm’s repayment obligations one period hence include the bank loan of $150, senior bonds of $60, and junior bonds of $50. The firm has announced its intention to declare bankruptcy. At this stage, creditors must choose one of two mutually exclusive restructuring plans: plan A under which the value of the firm next period will be $180 with probability 0.5 and zero with probability 0.5, and plan B under which the value of the firm next period will be $260 with probability 0.4 and $20 with probability 0.6. If you are the bank’s representative, which plan would you prefer and what sort of coordination problems would you expect? How would you attempt to overcome these problems? Assume universal risk neutrality and a zero discount rate.