Restructuring/Bankruptcy Question
I've been trying to learn more about the specifics of RX and bankruptcy recently and had two questions.
- How do secured creditors become over-secured? I understand that over-secured means that the collateral value exceeds the face value of the debt, but how does that actually happen (is it usually when the collateral becomes valuable for some reason?)
- Why are over-secured creditors entitled to post-petition interest? It seems counterintuitive that they should be compensated even more if the value of their collateral is more than enough to cover the value of the debt. Wouldn't it make more sense to allow companies to save this cash for operational needs or to repay debtholders who are lower in the capital structure (since these are the guys who are getting screwed harder)?
Any insight would be appreciated.
I'm curious as well. Perhaps owed debt was written down? Absolutely stumped here
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