A situation in which junior classes of creditors impose a cram-down on senior classes of creditors during a bankruptcy or reorganization. In a cram-up a company facing bankruptcy cannot force creditors to accept compromises to their claims outside of the courtroom, but the creditors themselves can agree to the terms. If enough junior class creditors agree to the terms set forth by a company seeking refinancing, they can force holdouts to be bound to the agreement, therefore cramming the refinancing up. Senior classes of creditors would therefore be forced to accept the terms, even if they are not as good as the original deal.


There are two primary cram-up methods: reinstatement and indubitable equivalent. In a reinstatement cram-up, the maturity of debt is kept at the pre-bankruptcy level, debt collection is decelerated and the debt is "cured." Lenders are compensated for damages, but the terms of the debt are kept the same. An indubitable equivalent, which is more commonly used, involves paying a stream of cash payments to creditors equal to the amount due. While this is happening, creditors maintain their liens, which can make it difficult for a post-restructuring company to maintain the funds necessary for working capital.

  1. Reorganization

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

    1. A situation in which a creditor is forced to accept undesirable ...
  3. Secured Creditor

    Any creditor or lender that takes collateral for the extension ...
  4. Creditor

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

    A rule that stipulates the order of payment - creditors before ...
  6. Bankruptcy

    A legal proceeding involving a person or business that is unable ...
Related Articles
  1. Investing Basics

    The Merger - What To Do When Companies Converge

    Learn how to invest in companies before, during and after they join together.
  2. Bonds & Fixed Income

    Top 8 Ways Lose Money On Bonds

    Find out what these common ways are so that you can avoid them - and the losses that follow.
  3. Options & Futures

    Bankruptcy Filing Changes That Could Affect You

    When the economy is down, more people file for bankruptcy. Make sure you know about the changes that have been made to this process.
  4. Home & Auto

    Equity Stripping Leaves Creditors Empty-Handed

    Add additional debt to your real estate assets to keep the creditors at bay.
  5. Options & Futures

    Taking The Sting Out Of Investment Loss

    Get a hold of yourself! Take losses in stride and learn to invest dispassionately.
  6. Entrepreneurship

    10 Ways to Be a Successful Entrepreneur

    Are you hoping to launch your own business and work for yourself? If so, here are the top 10 tips for entrepreneurs.
  7. Options & Futures

    Haunting Wall Street: The Halloween Terminology Of Investing

    Beware of zombies and Jekyll and Hyde companies! Read about the spooky terms circulating Wall Street.
  8. Entrepreneurship

    5 Biggest Challenges Facing Your Small Business

    Would-be business owners must consider the unique challenges that lie ahead when they start a small company. Following are five they are likely to face.
  9. Investing

    5 Iconic Airlines That No Longer Exist

    Learn the stories behind the disappearance of a number of formerly iconic airlines that no longer exist following financial difficulties or other problems.
  10. Investing

    5 Fortune 500 Companies That No Longer Exist

    Discover where the concept for the Fortune 500 list came from and learn about companies previously on the list that no longer exist.
  1. Does working capital include stock?

    A certain portion of a company’s working capital is generally composed of earnings; however, current short-term assets that ... Read Full Answer >>
  2. What are some alternatives a company can attempt prior to resorting to liquidation?

    Some alternatives a company's owners can attempt prior to resorting to liquidation are selling the company, raising money ... Read Full Answer >>
  3. Under what circumstances might a company decide to liquidate?

    There are many reasons a company may decide to liquidate. A smaller company may decide to liquidate if one of the main owners ... Read Full Answer >>
  4. What happens to the shares of a company that has been liquidated?

    The fate of a liquidating company’s shares depends on the type of liquidation the company is undergoing. The most common ... Read Full Answer >>
  5. What is the difference between compulsory and voluntary liquidation?

    Liquidation is the process where a firm's assets and liabilities are terminated, realized and subsequently distributed. In ... Read Full Answer >>
  6. What can cause a merger or acquisition deal to fail?

    When two large companies announce plans to merge, or when the larger of the two acquires the smaller entity, the surviving ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Bar Chart

    A style of chart used by some technical analysts, on which, as illustrated below, the top of the vertical line indicates ...
  2. Bullish Engulfing Pattern

    A chart pattern that forms when a small black candlestick is followed by a large white candlestick that completely eclipses ...
  3. Cyber Monday

    An expression used in online retailing to describe the Monday following U.S. Thanksgiving weekend. Cyber Monday is generally ...
  4. Take A Bath

    A slang term referring to the situation of an investor who has experienced a large loss from an investment or speculative ...
Trading Center