Cram-Down Deal

AAA

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.

INVESTOPEDIA EXPLAINS '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. Reorganization

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

    A situation in which junior classes of creditors impose a cram-down ...
  3. Cramdown

    A bankruptcy concept that is often employed to obtain a Chapter ...
  4. Creditor

    An entity (person or institution) that extends credit by giving ...
  5. Bankruptcy

    A legal proceeding involving a person or business that is unable ...
  6. Financial Singlularity

    A financial singularity is the point at which investment decisions ...
RELATED FAQS
  1. What are some common accretive transactions?

    The term "accretive" is most often used in reference to mergers and acquisitions (M&A). It refers to a transaction that ... Read Full Answer >>
  2. What are some ways to make a distribution channel more efficient?

    While there are many ways to make a distribution channel more efficient, the three high-level ways to increase the efficiency ... Read Full Answer >>
  3. How can I use a regression to see the correlation between prices and interest rates?

    In statistics, regression analysis is a widely used technique to uncover relationships among variables and determine whether ... Read Full Answer >>
  4. How is a tender offer used by an individual, group or company seeking to purchase ...

    A tender offer is made directly to shareholders in a publicly traded company to gain enough shares to force a sale of the ... Read Full Answer >>
  5. How does a company record profits using the equity method?

    A company that invests in another company and has majority control of it would record profits using the equity method. This ... Read Full Answer >>
  6. How do I calculate a modified duration using Matlab?

    The modified duration gauges the sensitivity of the fixed income securities to changes in interest rates. To calculate the ... Read Full Answer >>
Related Articles
  1. Fundamental Analysis

    Mergers And Acquisitions: Understanding Takeovers

    In the dramatic world of M&As, battleground terms meld with bizarre metaphors to form the language of the game.
  2. Fundamental Analysis

    Impairment Charges: The Good, The Bad And The Ugly

    Impairment charge is a term for writing off worthless goodwill, but you need to know what its potential impact is on EPS.
  3. Bonds & Fixed Income

    What Are Corporate Actions?

    Be a savvy investor - learn how corporate actions affect you as a shareholder.
  4. Forex Education

    Mergers & Acquisitions: An Avenue For Profitable Trades

    When major corporate transactions have a big impact on the currency markets, you can benefit.
  5. Investing

    Strategies Activist Shareholders Follow

    Activist shareholders, also called activist investors, are large-scale investors who use their investment power to influence public companies. While their goals can vary widely, the strategies ...
  6. Economics

    What Does Going Concern Mean?

    Going concern is a concept used in business and accounting to describe the fiscal health of a company.
  7. Investing

    Has Nepotism Ever Worked?

    It may very well be that hiring a relative is the right course of action for you. But before you do, carefully consider how hiring family could hurt your business.
  8. Investing

    What Can A Conference Call Tell About Trends?

    Messages in a company conference call can be easily misconstrued. But there is a way to cut through the talking points to get to the real substance.
  9. Fundamental Analysis

    Which US Airlines Are Poised For Long-Term Gains?

    The US airline industry has undergone a dramatic transformation since the last bear market, with one or two carriers likely to outperform in coming years.
  10. Fundamental Analysis

    Companies That Went Bankrupt From Innovation Lag

    Companies that don't keep up with market-changing innovations run the risk of going bankrupt. We look at some examples.

You May Also Like

Hot Definitions
  1. Unfair Claims Practice

    The improper avoidance of a claim by an insurer or an attempt to reduce the size of the claim. By engaging in unfair claims ...
  2. Killer Bees

    An individual or firm that helps a company fend off a takeover attempt. A killer bee uses defensive strategies to keep an ...
  3. Sin Tax

    A state-sponsored tax that is added to products or services that are seen as vices, such as alcohol, tobacco and gambling. ...
  4. Grandfathered Activities

    Nonbank activities, some of which would normally not be permissible for bank holding companies and foreign banks in the United ...
  5. Touchline

    The highest price that a buyer of a particular security is willing to pay and the lowest price at which a seller is willing ...
  6. Himalayan Option

    An exotic equity option belonging to a class known as mountain range options. Himalayan options are based on a basket of ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!