A cram-down is utterly inconsistent with this objective by definition — it is the opposite of compromise — and why should future creditors opt for good-faith negotiations when they believe that any concessions will be taken and then abused in a future cram-down process?
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Most significantly, it preserves cram-down power and in one sense makes it easier to start the process.
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Will future investors, having lived through a cram-down, have warm thoughts about investing in the Commonwealth again?
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Language allowing Puerto Rico to cut repayments to creditors without their consent, known as a "cram-down," remains.
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The current bill merely requires Puerto Rico to make "good-faith efforts" toward a cooperative deal before initiating a cram-down action.
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"He's trying to cram down as many parts of his liberal agenda on the United States of America as he possibly can," Abbott said.
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And so we must ask whether it is a cram-down process or negotiation that is more likely to satisfy five relevant policy goals.
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If there is not enough support from creditors, Puerto Rico will have no other option but to cram down its own plan, Bienenstock warned.
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House Republicans rightly opposed a mortgage cram-down during the financial crisis, and so it's certainly inconsistent that they would embrace the concept here.
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I think that's a much better way to do it than me having a prescribed agenda that I'm attempting to cram down an audience's throat.
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Sources said that he and private equity partners have been trying to add more funding in exchange for what could be a cram-down of existing investors.
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"He's trying to cram down as many parts of his liberal agenda on the United States of America as he possibly can" before leaving office in January.
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An effective bill does not need a great many Democrats in support but it needs enough of them to avoid the appearance of a partisan cram-down.
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Accordingly, I take offense with the notion that banks should have the right to put cram-down arbitration clauses into every citizen's "hook up" to the payment system.
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Similar to Chapter 11 proceedings in the United States, the mechanism offers a cram-down provision, stopping minority dissenting creditors from blocking a settlement agreed by the majority.
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The mechanism, similar to Chapter 11 proceedings in the United States, offers a so-called cram-down provision, preventing minority dissenting creditors from blocking a settlement agreed by the majority.
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The draft bill proposed by the House Natural Resources Committee contains a "cram-down" of creditors that would allow Puerto Rico to walk away from its debts — once again, Chávez-style.
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And, second, the re-creation of fiscal discipline decidedly is not a goal consistent with the cram-down approach; if current creditors can be strong-armed, why not future ones as well?
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Hatch, too, wants to protect creditors, but said the bill must include cram-down authority to ensure that more senior bondholders, like those holding Puerto Rico's constitutionally backed public debt, are better protected.
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First, a cram-down might be better than negotiations at reducing the immediate problem of debt service costs; after all, by its very nature, coercion is better than agreement in terms of extracting concessions from adversaries.
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That is because the latest draft of PROMESA removes a pre-condition to cram-down which would have required Puerto Rico to first complete consensual workout talks with creditors, allowing them to vote on a restructuring plan.
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Some conservative House Republicans, who want to protect creditors' rights, have balked at an element of the bill that could allow Puerto Rico to cut repayments to creditors without their consent, a so-called cram-down debt restructuring.
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Such collective action approaches have proven effective at driving competing interests toward reasonable compromises in debt restructurings, but the commonwealth has resisted this approach thus far because it does not involve the sort of cram-down that bestows huge advantages upon the debtor.
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Many of the creditors lobbying conservatives in Congress to oppose the legislation, known as the Puerto Rico Oversight, Management and Economic Stability Act (PROMESA), would prefer to keep debt-restructuring talks out of a bankruptcy court, or at least avoid cram-down.
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By October around 88% of creditors had agreed to sign up to the deal and court processes were started to initiate the use of Decree 57 in Dubai and a UK scheme of arrangement in England to cram down a couple of holdout lenders.
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The engine is located behind the driver's compartment, but it's not all that loud or raucous, which can also lull you into complacency — until you look down at the speedometer and then quickly cram down on the brakes lest a police cruiser lurk around the next corner.
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In contrast, any House bill that does not permit fair negotiations and instead includes the "cram down" provisions favored by the Obama administration that would force nonconsensual debt restructurings on creditors will fail to preserve Puerto Rico's access to the capital markets, which is critical for the commonwealth's economic future and its ability to meet citizens' needs.
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The alternative is for whoever wins Tuesday's election to cram down the throats of the losing opposition a Supreme Court nominee, who will if and when confirmed join four judicial colleagues to form a bare majority that will cram their views down the throats of the dissenting Justices, not to mention all the millions of citizens who voted for the losing presidential candidate.
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In short, a cram-down process will penalize those not responsible for the fiscal problems confronting Puerto Rico, will weaken commonwealth incentives to adopt fiscal and governance reforms, will increase future borrowing costs for the island and for the municipal bond market writ large, will encourage future intransigence on the part of everyone, and will increase rather than reduce the politicization of the municipal bond market.
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More from Tonic: Drew, a 33-year-old who lives in Brooklyn (and who asks that his last name not be used in this article since the upcoming mentions of cannabis could compromise his job), tells me that as a kid in Minnesota, he would get really excited and anxious about going to the Mexican restaurant Chi-Chi's for his birthday—so much so that when he got there, he'd cram down three tacos, and immediately throw it all up.
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The term "cram down" in the reorganization context appears in case law as early as 1944.New Eng. Coal & Coke Co. v. Rutland R. Co., 143 F.2d 179 (1944).
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The deed of company arrangement may involve a simple moratorium for a fixed period, or a composition of creditors' claims whereby creditors agree to accept a cram down, or a plan to pay creditors in deferred instalments, or some combination of these things.
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The key difference between H.R.1106 and S.896 is that the latter does not include a controversial cram down provision, which failed to garner majority support in the Senate. On May 19, the House approved an amended version of S. 896 by a 367-54 vote, with one member voting "present". The Senate promptly approved the House's amendment, and President Obama signed the bill into law the next day.
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Section 7 and Schedule 9 amend the Companies Act 2006 to insert a new part into that act which will allow for companies in financial difficulty, or which are likely to encounter financial difficulties, to propose a restructuring plan which allows into to compromise certain creditors or shareholders. The restructuring plans introduced under this section are modelled to the existing scheme or arrangement provisions but with the addition of the ability to cram down across classes of creditors.
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During the height of the global financial crisis in 2008, Gillibrand, then a member of the House of Representatives, voted twice against the Emergency Economic Stabilization Act of 2008, calling it "fundamentally flawed". However, she did vote for the auto industry bailout in December 2008. At a press conference on January 25, 2009, Gillibrand said that during her first week in the Senate, she would work to ensure that the stimulus bill included relief funds for New York State. She supported the President's recovery plan and budget, and voted for cram down to allow judges to write down mortgages of struggling homeowners.
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Pre-bankruptcy equity holders may not, over the objection of a senior class of impaired creditors in a Chapter 11 plan, contribute new capital and receive ownership interests in a reorganized entity, when the opportunity is given only to the old equity holders under a plan adopted without consideration of alternatives. Rather, in order not to violate the absolute priority rule, a plan conferring an interest to old equity must extend an opportunity to others who may compete for the equity (e.g. at auction) or who may propose a competing reorganization plan. Cram down is barred if a junior interest (old equity) holder under a proposed Chapter 11 plan receives or retains property “on account of” such junior interest.
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In IRC v Wimbledon Football Club Ltd[2004] EWCA Civ 655, [2005] 1 BCLC 66 the Court of Appeal held that the objection of the Inland Revenue (then a preferential creditor) would not be an absolute bar to a CVA, after Wimbledon F.C. prevaricated over relocation. Because the essential problem of insolvent companies is excessive indebtedness, the Insolvency Act 1986 sections 1 to 7 contain a procedure for companies to ask creditors to reduce the debt they are owed, in the hope that the company may survive. For instance, directors might propose that each creditor accepts 80 per cent of the money owed to each, and to spread repayments out over five years, in return for a commitment to restructure the business' affairs under a new marketing strategy. Under chapter 11 of the US Bankruptcy Code this kind of debt restructuring is usual, and the so-called "cram down" procedure allows a court to approve a plan over the wishes of creditors if they will receive a value equivalent to what they are owed.See the US Bankruptcy Code §1129(b)(2) However, under UK law, the procedure remains predominantly voluntary, except for small companies.
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