What does the term "cramdown" refer to in bankruptcy?

The term "cramdown" in the context of bankruptcy refers to the ability of a bankruptcy court to confirm a reorganization plan even if one or more classes of creditors oppose it, provided that certain legal conditions are met. This is significant because it allows a company in financial distress to move forward with a restructuring that may be necessary for its survival, even if some creditors disagree with the proposed terms.

In a cramdown scenario, the court has the authority to impose the reorganization plan on dissenting classes of creditors, as long as the plan is fair and provides at least the minimum recovery to those creditors compared to what they would receive in a liquidation scenario. This mechanism is particularly relevant in Chapter 11 bankruptcy cases, where a company seeks to reorganize rather than liquidate its assets.

The other options relate to different aspects of bankruptcy proceedings. Approval of a plan by all creditors signifies consensus and is generally preferable but doesn't capture the essence of a cramdown. Payment of secured creditors first is a standard occurrence in bankruptcy but doesn’t encompass the concept of a court-imposed plan approval. Finally, complete liquidation of company assets refers to a different process, typically associated with Chapter 7 bankruptcy, which is not relevant to the cramdown mechanism. Thus,