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To embed, copy and paste the code into your website or blog: Postpetition financing provided by pre-bankruptcy shareholders or other insiders is not uncommon in chapter 11 cases as a way to fund a plan of reorganization and allow old shareholders to retain an ownership interest in the reorganized entity. The practice is typically sanctioned by bankruptcy courts under an exception the new value exception to the absolute priority rule, which prohibits shareholders and junior creditors from receiving any distribution under a plan on account of their interests or claims unless senior creditors are paid in full or agree otherwise. Such a proposed financing arrangement was the subject of a ruling recently handed down by the U.S. Bankruptcy Court for the Southern District of New York. In

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