Question
Gonebroke.com has three creditors: a bank with seniority in the amount of $160, Senior Bondholders in the amount of $70, and a steel trade creditor
Gonebroke.com has three creditors: a bank with seniority in the amount of $160, Senior Bondholders in the amount of $70, and a steel trade creditor with no priority in the amount of $25. Gonebroke.com has proposed the following two debt restructuring plans.
Plan A: 70% chance the value of the firm =$230
30% chance the value of the firm = $200
Plan B: 80% chance of the value of the firm = $430
20% chance the value of the firm = $135
What is the expected value of the two different restructuring plans respectively to the three creditors if the Bankruptcy Court Absolute Priority Rule (APR) is strictly observed?
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