Mayer Comments on Alternative Financing in Chapter 11 Proceedings

Corporate Restructuring and Bankruptcy partner Thomas Moers Mayer was quoted in a Wall Street Journal article about companies in Chapter 11 proceedings that owe creditors more than they are worth, and the legal strategies unsecured creditors are taking to ensure themselves some recovery. In such situations, unsecured creditors - who are among the last to receive repayment in bankruptcies - find themselves having to move quickly to ensure some recovery when companies in Chapter 11 proceedings have exit plans that wipe out its investment. Commenting on the alternative financing strategy Kramer Levin used in the Cooper-Standard Holdings bankruptcy, Mayer was quoted as saying that when Cooper-Standard filed for bankruptcy protection, it seemed that senior bondholders (unsecured creditors) would receive a token recover, and the secured lenders would control the company. Ultimately, an exit plan was developed whereby investors, including certain bondholders, would invest $355 million into Cooper-Standard, allowing lenders and senior bondholders to be paid in full, and subordinated bondholders recovering more than a quarter of what they are due. Mayer further said that extending the length of a Chapter 11 case can provide unsecured creditors more leverage.