Cramdown

Definition:

The ability of the bankruptcy court to confirm a plan of reorganization over the objections of some classes of creditors. This often involves resetting the amount of principal that the bond holders are owed. Related is a mortgage cramdown. Here the home owner cannot pay the mortgage because of financial distress and, indeed, the mortgage could be a higher value than the house. A cramdown resets (lower) the principal amount of the mortgage. This may allow the homeowner to stay in the house (avoid foreclosure).

Investing Essentials


Copyright © 2011 Campbell R. Harvey, Professor of Finance, Fuqua School of Business at Duke University

Term of the Day

Credit Terms

The conditions under which credit will be extended to a customer. The components of credit terms are: cash discount, credit period, net period.

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