Chapter 11 Preferred Equity In Peril?
Two Recent Cases Shed Light on Potential Risks to Preferred Equity Holders in Chapter 11 Preferred equity is a varied and flexible instrument, but, in practice, it typically has a limited number of common features. One feature is that it is entitled to a “liquidation preference” ahead of common stock. Whether the liquidation preference of preferred equity entitles preferred shareholders to priority over common shareholders in a Chapter 11 reorganization is a question that figured prominently in two recent high profile cases.
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