Firm F has entered a bankruptcy procedure and the management is trying to rene- gotiate its debt with its creditors. F has two types of non-interest-bearing debt, a

senior debt with face value m10 and a junior debt with face value m5. Both debts have just reached maturity. If F cannot reach an agreement with all its debtholders on the restructuring of its debt, F will be immediately liquidated for a value of m9. Fs management offers its debtholders a restructuring plan that leaves face values and priorities unchanged but extends maturities by one year. The estimate is that in one year, Fs assets will be worth m30 with probability 0.5 and m5 with probability 0.5.

(a) Will junior debtholders accept the restructuring plan? (b) Will senior debtholders accept the restructuring plan? (c) How could you amend the restructuring plan to make it more likely to be accepted (qualitative answer)?