I have some bonds from Dynegy Energy which mature in 2019. I bought them when they were B rated but now they've filed Chap 11. What usually happens to bond holders during a Chap 11? I know under Chap 7, the company is in liquidation and bondholders have priority over stockholders with respect to assets. What about Chap 11? Given that the company is trying to reorganize in order to survive, I assume bondholders might have interest payments delayed but that ultimately the company would have to make good on its debts. I also assume the company might try to take advantage of skittishness among investors by offering to pay up some sub-par amount to bondholders in order to ditch some debt at a discount. What am I missing?
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