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Fixed Income Q121

121A subordinated bondholder recovered some value in bankruptcy without a senior creditor getting paid in full. The most likely explanation is:
  • Option : B
  • Explanation : All impaired classes get to vote on the reorganization plan. Negotiation and compromise are often preferable to incurring huge legal and accounting fees in a protracted bankruptcy process that would otherwise reduce the value of the estate for all claimants. This process may allow junior creditors (e.g., subordinated bondholders) recover some value even though more senior creditors do not get paid in full.
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