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Hopeless.com has three creditors: a bank with seniority in the amount of $450. Senior Bondholders in the amount of $230, and a steel trade creditor
Hopeless.com has three creditors: a bank with seniority in the amount of $450. Senior Bondholders in the amount of $230, and a steel trade creditor with no priority in the amount of $50. Hopeless.com has proposed the following two debt restructuring plans. Plan A: 50% chance the value of the firm =S650 50% chance the value of the firm = $500 Plan B: 35% chance of the value of the firm = $900 65% chance the value of the firm = $235 A.) What is the expected value of the two different restructuring plans respectively to the three creditors if Absolute Priority Rule (APR) is strictly observed? Is there a creditor coordination problem? B.) Can the bank resolve the creditor coordination problem prior to bankruptcy court? Demonstrate your answer with numbers
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