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Plan Conversions of Debt to Equity: The Means, the Math, the Risks and the Upsides

Level: Advanced
Runtime: 64 minutes
Recorded Date: July 21, 2017
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9:30 am - 10:45 am
  • Oberservations
  • Rights Offerings/Backstop Agreements
  • Valuation Disuptes
  • Equity Committees
  • Other Potential Issues
Runtime: 1 hour and 4 minutes
Recorded: July 21, 2017


The next evolution of insolvency practice is upon us. The morphing of what started as a restructuring practice into a ? 363 sale practice is old news, while the more recent introduction of nontraditional, sophisticated financial investors into the process has brought about another evolution: the debt-to-equity conversion. Why settle for prime and three when you can use Bankruptcy Code provisions like the absolute priority rule and the securities law exemption to come out post-effective date with a freely tradable equity instrument that will enable the holder to share in all of the upside of the reorganized enterprise?

This panel explores the mechanics of a debt-to-equity conversion in the context of a chapter 11 plan in the legal context, then explains the valuation metrics and allocation calculations that underlie the dynamics as to who gets to participate and the amount of equity offered to the various case constituencies. The discussion also covers the tools used to spur creditor acceptance of the conversion and uses of the paradigm as a means of raising new capital for the restructured debt, such as backstop agreements and rights offerings.

This program was recorded on July 21st, 2017.

Provided By

American Bankruptcy Institute
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Hon. James J. Tancredi

U.S. Bankruptcy Judge
U.S. Bankruptcy Course - District of Connecticut

James J. Tancredi was sworn in as a United States Bankruptcy Judge for the District of Connecticut on September 1, 2016. Prior to his appointment to the bench, Judge Tancredi was a commercial litigation and business restructuring partner at Day Pitney, LLP (f/k/a Day Berry & Howard) which he joined in 1979 following graduation from the University of Connecticut School of Law.

Judge Tancredi had cultivated a diverse and challenging practice that crossed major industries, moved from regional to national scope and secured material roles in prominent restructuring and bankruptcies. During his thirty-seven year career at Day Pitney, LLP, he tried dozens of cases, represented a full range of constituents, and he assembled and led innumerbale teams to collaborative success in often highly contested, first-impression financial reorganizations.

Judge Tancredi was consistently ranked as one of the Best Lawyers in America, New York and New England and recognized as a co-founder of his firm's Bankruptcy and Reorganization Practice. Judge Tancredi is the co-author of the leading treatise on alternatives to Chapter 11 (Strategic Alternatives For and Against Distressed Businesses), and a frequent lecturer at the UCONN School of Law and CLE seminars.

During his career, he has been active in professional associations, including the ABA, ABI, CT Bar Association, HCBA and CTTMA. Judge Tancredi previously served as President of The Hartford County Bar Association (the oldest bar association in the country) and as President of the Connecticut chapter of the Turn Around Management Association.

He is a graduate of the University of Connecticut School of Law and the College of the Holy Cross.

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P. Sabin Willett

Morgan Lewis

Sabin Willett tries cases, adversary proceedings and contested matters, and argues appeals, largely in disputes concerning corporate insolvency. Practicing typically in the bankruptcy, Delaware Chancery, and federal district courts, he often represents parties to fraudulent transfer, plan valuation, and other complex Chapter 11 disputes.

Before joining Morgan Lewis, Sabin was a partner in the financial restructuring practice at another international law firm. A fellow of the American College of Bankruptcy, he co-leads defense groups in the Tribune and Lyondell fraudulent transfer litigation, led the trial team that mitigated damages in Tronox, and prevailed in the New York Court of Appeals in Quadrant. He also led a pro bono team that won freedom for Uyghur Guantanamo detainees.

Sabin received his JD, Cum Laude at Harvard Law School in 1983.

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Michael O'Hara

Managing Director, Debt Advisory & Restructuring Group
Jefferies LLC

Michael O’Hara is co-head of the U.S. and a managing director in the Debt Advisory and Restructuring Group of Jefferies LLC in New York. He provides investment banking advisory services on a variety of restructuring and special-situation assignments for companies, creditors, corporate board committees, and acquirers and sellers of distressed assets.

Mr. O’Hara’s notable company/debtor assignments include AbitibiBowater, Akorn Pharmaceuticals, American Axle & Manufacturing, AIG, Ascent Resources Marcellus, Brock Group, Energy Future Holdings, EXCO Resources, Fusion Connect, Mallinckrodt, MoneyGram, Mrs. Fields, Quad Graphics (re: Vertis), RockPile Energy Services, Samson Resources, Southland Royalty Co., Taro Pharmaceutical, Travelport, Triangle Petroleum and Washington Mutual, among others. His creditor assignments have included Chaparral Energy, Dana, Delphi, Eastman Kodak, EP Energy, Extraction, Gulfport, Hostess Brands, Intrawest, Jupiter Resources, Lehman, Preferred Sands, Quicksilver Resources, Ultra Petroleum and Vanguard Natural Resources, among others.

Mr. O’Hara has worked on several sovereign situations, including Argentina (Enron/Azurix), Greece and Iceland (Kaupthing). He has served as a guest lecturer at the University of Chicago Booth School, Columbia Business School and the Wharton School at the University of Pennsylvania, among others, and has participated in many restructuring industry conferences.

Before joining Jefferies, Mr. O’Hara was a partner in the Restructuring and Special Situations Group of PJT Partners (formerly Blackstone). He also previously worked in the M&A groups at Wasserstein Perella & Co. and Stephens Inc.

Mr. O’Hara received his B.S. in finance from Georgetown University and his M.B.A. from Columbia Business School.

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Laura Davis Jones

Pachulski, Stang, Ziehl & Jones LLP

Laura Davis Jones is a name partner and managing committee member of the national bankruptcy law firm of Pachulski Stang Ziehl & Jones LLP, and is the managing partner of the firm's Delaware office. She gained national recognition as debtor's counsel in the Continental Airlines bankruptcy case, and has represented numerous debtors, creditors' committees, bank groups, acquirers, and other significant constituencies in chapter 11 cases and workout proceedings. She lectures at national bankruptcy and litigation seminars, and has authored numerous articles. Ms. Jones was named "Deal Maker of the Year" by The American Lawyer and has been profiled on additional occasions in The American Lawyer. Ms. Jones has been named continuously by her peers as one of the "Best Lawyers in America" and as one of the "Best Lawyers in Delaware," and was selected as one of the top ten lawyers in Delaware by "Delaware Super Lawyers." She is included among Chambers USA America's "Leading Lawyers for Business," and ranked among the top-tier Bankruptcy/Restructuring lawyers in Delaware.

Ms. Jones has been recognized in the K&A Restructuring Register and the Law Dragon 500 since their inception, has been named repeatedly to the International Who's Who of Insolvency and Restructuring Lawyers, and holds an AV Peer Rating, Martingale-Hubbell's highest peer recognition for ethical standards and legal ability. She started her career as a judicial law clerk in the Bankruptcy Court for the District of Delaware. Ms. Jones is admitted to practice in Delaware and the District of Columbia.

Recent debtor clients include American Apparel, Emerald Oil, Deb Stores, Cache Inc., Magnum Hunter Resources, Delivery Agent, Revstone Industries, Exide Technologies, EveryWare Global, AFA Investment and SS Body Armor, Inc. Recent creditor representations include the creditors' committees of LCI Holding Company ("LifeCare") and NE Opco, and co-counsel to the second lien notes indenture trustee of Energy Future Holdings Corporation.

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