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I own Kmart bonds that are in Chap 11 bankruptcy today. What can I expect to happen now?

The lawyers will drag out the bk process for as long as possible. Asalesman gets paid when a deal closes; a lawyer quits getting paid when the deal closes.

I know that I should end up with something, but I have no idea what will happen? Will they pay me 50% value and drop me off (or less), or will I be carried forward and paid in the future if the company improves?

Creditors get divided into multiple classes according to seniority of their claims. This is spelled out in the bond indenture. Generally the ranking from the top is: Senior secured, senior, junior, unsecured debt, trade claims and payables, preferreds, convert pfds, then lastly common. Under the absolute priority rule if a class senior to you is impaired(ie gets less than the full amount of their claim) you get zero unless the senior class agrees to give your class anything. Realistically, you probably will get a combo of some cash, some new debt and a large chunk of equity of the reorged KM. In other words, 98+% of the common shareholders will be wiped out entirely, even in an 11. Don't waste your $ buying any of the common now; it's a sure way to piss away your money.
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