A POR categorizes all creditors into classes, from the most senior to the least. Common equity usually come last. With a POR comes a disclosure statement that lists the level of impairment of each class. If a class is impaired, ie recovery is less than the total claim, then the class is allowed to vote on the POR by ballot. Only impaires classes get to vote. The POR only needs approval from one impaired class to pass. A class is deemed to accept the POR if at least 2/3 the $ amount AND 1/2 in number have accepted.
Now people who say commons get nothing in a bankruptcy exit because shares get cancelled usually stop at the above sentence « common equity usually come last ». Well well well....it gets a bit more tricky when NOLs are factored in...for NOLs to be preserved, common equity needs to own at least 40% of the reorganized company. This means common equity WILL get something. Also...acceptance rule makes it impossible for the POR to only require ESL/Lampert for acceptance. Indeed, although they hold 2/3 of the common equity class in dollar, WE hold 1/2 in number AND common equity class MUST accept the POR for NOLs to be preserved! Therefore they will need to pass the POR by us for approval :)
