Lehman Brothers Financial SA (LEHNQ)

[linda1]

I HAVE SOME GOOD NEWS - I FOUND AN ARTICLE BY THE AMERICAN BANKRUPTCY INSTITUTE

THAT OFFERS SOME HOPE FOR THE CTS - AND JUNIOR CLASSES.



http://www.abiworld.org/CRC10/Medford%20Lumber%20Company%20final.pdf



PAGES 31 - 32 - ABSOLUTE PRIORITY RULE



"If the debtor does not have sufficient assets to pay a particular class in full, to comply with the

absolute priority rule, the creditors in the senior class must divide the remaining assets equally

amongst themselves and all junior classes must receive nothing under the plan (unless the class of senior

creditors votes for a different treatment). It is not uncommon, however, because of the settlement and

negotiation dynamic of chapter 11, that a plan successfully solicit senior classes to accept a plan that

pays something to junior classes, rather than strictly following this absolute priority rule."




I THINK THIS AUTHORITATIVE ARTICLE CONTAINS ALL THE INFORMATION WE NEED TO PRESENT TO THE HONORABLE JUDGE JAMES M. PECK.




HERE IS THE TOTAL EXCERPT TO READ -



Absolute Priority Rule -


In most bankruptcy cases, for the bankruptcy court to confirm a plan of reorganization, the

court must find that the plan complies with the “absolute priority rule.” The absolute priority rule

requires that all senior classes of creditors either (a) be paid in full prior to junior classes of

creditors being paid anything (as described above), or (b) the senior class votes to accept a plan

that allocates value to a junior class prior to the senior class being paid in full. A senior class will

receive “full” payment through (a) cure and reinstatement of the claims of the creditors in that

class (which includes paying any arrearages, and complying with the terms of the contract

thereafter), (b) cash, or (c) through receipt of securities that the bankruptcy judge determines to

be of equal value to the class’ pre- bankruptcy securities (this last option is sometimes referred to

as a “cram-up”).


If the debtor does not have sufficient assets to pay a particular class in full, to comply with the

absolute priority rule, the creditors in the senior class must divide the remaining assets equally

amongst themselves and all junior classes must receive nothing under the plan (unless the class

of senior creditors votes for a different treatment). It is not uncommon, however, because of the

settlement and negotiation dynamic of chapter 11, that a plan successfully solicit senior classes

to accept a plan that pays something to junior classes, rather than strictly following this absolute

priority rule.


The absolute priority rule (as well as plan classification, voting, and cram down) is tested on a

debtor by debtor basis. Absent a contractual provision to the contrary, the creditors of one

affiliated debtor are generally not permitted to look to the assets of a different affiliated entity,

and creditors of a subsidiary will have no direct recourse to the parent, and vice versa.