Debtors in bankruptcy cases have long sought to make distributions to old equity without running afoul of the absolute priority rule. Time and again, debtors' efforts to leave old equity with value in a reorganized entity have been challenged in the appellate courts, and often in the Supreme Court.
The Absolute Priority Rule
Debtors in bankruptcy cases have long sought to make distributions to old equity without running afoul of the absolute priority rule. Time and again, debtors' efforts to leave old equity with value in a reorganized entity have been challenged in the appellate courts, and often in the Supreme Court. A proposed distribution to old equity in the complex Armstrong World Industries (AWI) case was struck down recently by the U.S. Court of Appeals for the Third Circuit Court. <i>In re Armstrong World Indus., Inc.</i>, 432 F.3d 507 (3rd Cir. 2005).
By
Daniel A. Lowenthal
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