No. of Recommendations: 1
Theoretically in a bankruptcy the distribution order should be:

1. Secured debt-to the extent of collateral
2. Unsecured debt
3. Preferred Stock
4. Common Stock

However practically I have seen where common stock holders retain a small interest in a reorganized entity even when bond holders have not been fully repaid. Does anyone know why this happens? Also how do unsecured creditors fare versus secured creditors? (practically) Would the secured debt garner more based upon the FMV of their collateral on the bankruptcy date and the remainder be on par with the unsecured creditors?
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