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Term of the Day - October 14, 2004
http://www.investopedia.com
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Term Of The Day: Crammed Down
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1. When venture capitalists refuse to invest unless earlier
investors lower the value of their original investment.
2. A bankruptcy procedure which allows a bankruptcy court to
initiate a reorganization plan for a company despite
objections from creditors. The creditors will still maintain
collateral on the company as long as the firm offers repayment
of the "secured portion" or fair market value of the collateral
in their repayment plan.
Investopedia Says:
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1. If the earlier investors don't pony up new cash for the
next round of financing then their interest in the company is
"crammed down".
2. Creditors usually don't like this because they would rather
liquidate the company's assets and get back some of the money
owed to them.
Related Links:
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Article: Dealing with "Cram-Down"
http://www.independentdealer.com/finance/finance8.asp
Related Terms:
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Absolute Priority
http://www.investopedia.com/terms/a/absolutepriority.asp
Bankruptcy
http://www.investopedia.com/terms/b/bankruptcy.asp
Venture Capital
http://www.investopedia.com/terms/v/venturecapital.asp
Have a Great Weekend!
The Investopedia Staff
http://www.investopedia.com
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