Cram-Down Deal

DEFINITION of 'Cram-Down Deal'

1. A situation in which a creditor is forced to accept undesirable terms imposed by a court during a bankruptcy or reorganization.

2. A merger or acquisition with unfavorable terms, in which shareholders or debtors of the target company are forced to accept because no better option exists. This generally occurs when the target company is in a troubled financial state.

BREAKING DOWN 'Cram-Down Deal'

The term "cram-down deal" can be used in several situations in finance, but consistently represents an instance where someone is forced to accept adverse terms because the alternatives are even worse. An example of a cram down deal would be where a bondholder is forced to take equity in a reorganized company in lieu of receiving cash.

RELATED TERMS
  1. Cramdown

    A bankruptcy concept that is often employed to obtain a Chapter ...
  2. Reorganization

    A process designed to revive a financially troubled or bankrupt ...
  3. Cram-Up

    A situation in which junior classes of creditors impose a cram-down ...
  4. Chapter 13

    A U.S. bankruptcy proceeding in which the debtor undertakes a ...
  5. Crammed Down

    1. A situation in which venture capitalists refuse to invest ...
  6. Chapter 11

    Named after the U.S. bankruptcy code 11, Chapter 11 is a form ...
Related Articles
  1. Bonds & Fixed Income

    An Overview Of Corporate Bankruptcy

    If a company files for bankruptcy, stockholders have the most to lose. Find out why.
  2. Bonds & Fixed Income

    Taking Advantage Of Corporate Decline

    A bankrupt company can provide great opportunities for savvy investors.
  3. Entrepreneurship

    Alternatives To Business Bankruptcy

    Bankruptcy isn't the only alternative for a struggling business. It can try negotiating with creditors or liquidating assets outside the U.S courts.
  4. Investing

    Chapter 11 Bankruptcy: Is It Better To Be a Stockholder or Bondholder? (BTU)

    Discover why energy companies are struggling to stay solvent, while examining the basics of Chapter 11 bankruptcy and its effect on stock and bond holders.
  5. Active Trading

    Discovering The Force Index

    Learn how to measure the power of bulls behind rallies and bears behind declines.
  6. Investing Basics

    What Merger And Acquisition Firms Do

    The merger or acquisition process can be intimidating. This is why merger and acquisition firms step in to facilitate the process.
  7. Investing Basics

    The Merger - What To Do When Companies Converge

    Learn how to invest in companies before, during and after they join together.
  8. Term

    What's a Debtor?

    A debtor​ is an individual or company that owes money.
  9. Investing Basics

    Banker's Acceptance 101

    A banker's acceptance, a common way of financing international trade activity, provides a relatively safe, short-term vehicle for investors. An acceptance is a negotiable time draft that a bank ...
  10. Personal Finance

    What Investors Can Learn From M&A Payment Methods

    How a company pays in a merger or acquisition can reveal a lot about the buyer and seller. We tell you what to look for.
RELATED FAQS
  1. What happens when a corporation declares bankruptcy?

    Understand what options are available to corporations under bankruptcy protection, and learn what takes place after bankruptcy ... Read Answer >>
  2. What happens if I own a stock that is purchased by another company after filing for ...

    In declaring bankruptcy, a company is basically telling the market that it owes more money than it is worth. If the company ... Read Answer >>
  3. What are the differences between chapter 7 and chapter 11 bankruptcy?

    Chapter 7 bankruptcy is sometimes also called liquidation bankruptcy. Firms experiencing this form of bankruptcy are past ... Read Answer >>
  4. What happens to a company's stocks and bonds when it declares chapter 11 bankruptcy ...

    Filing for chapter 11 bankruptcy protection simply means that a company is on the verge of bankruptcy, but believes that ... Read Answer >>
  5. What is the difference between a merger and an acquisition?

    Read about the legal and practical differences between a corporate merger and corporate acquisition, two terms often used ... Read Answer >>
  6. What effect did the Bankruptcy Abuse Prevention and Consumer Protection Act of 2 ...

    Credit card companies and banks hate deadbeats who take from their bottom lines. They especially dislike the Chapter 7 bankruptcy ... Read Answer >>
Hot Definitions
  1. Reverse Mortgage

    A type of mortgage in which a homeowner can borrow money against the value of his or her home. No repayment of the mortgage ...
  2. Labor Market

    The labor market refers to the supply and demand for labor, in which employees provide the supply and employers the demand. ...
  3. Demand Curve

    The demand curve is a graphical representation of the relationship between the price of a good or service and the quantity ...
  4. Goldilocks Economy

    An economy that is not so hot that it causes inflation, and not so cold that it causes a recession. This term is used to ...
  5. White Squire

    Very similar to a "white knight", but instead of purchasing a majority interest, the squire purchases a lesser interest in ...
  6. MACD Technical Indicator

    Moving Average Convergence Divergence (or MACD) is a trend-following momentum indicator that shows the relationship between ...
Trading Center