Glossary
Credit and risk
What is Chapter 11?
US court reorganisation: the company keeps operating while creditors vote on a plan.
It brings an automatic stay, DIP financing and class voting that binds dissenters. Out-of-court exchanges are faster but bind only those who agree.
A worked example
A retailer with $1.2bn of debt and a $700m enterprise value files for Chapter 11. The stores stay open, creditors are stopped from seizing assets, and the company has to propose a plan splitting that $700m among the people it owes.
Where it catches you in the game
- The restructuring desk's route toggle: Chapter 11 or out of court.
It comes up most on the restructuring desk.
Related terms
Learn it by using it
Definitions stick once they've cost you money. Take a seat, make three calls a year and watch what Chapter 11 does to your returns.