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Msg  158050 of 158065  at  10/25/2023 4:42:34 PM  by

wavb


Re: why

<<...it’s not supposed to favor the lender like this it could be considered a scheme to circumvent the rule>>
  
I am not at all knowledgeable in this area of BK, but my research (see stuff written by law firms) indicates that this is precisely allowed under BK reorg provided they meet criteria laid out under section 382. (And it appears BK reorg is the ONLY place this is allowed, hence the answer to brewcrew's wondering how/why reorg where he gets nothing).
 
The major moral crime here is PB3 telling small shareholders, people who clearly had little idea what they were doing in an advanced situation, that they could ignore anyone suggested anything they didn't want to hear. The long-winded missives that contained more bullshit, innuendo, ignorant supposition and just plain guessing, than fact. 
 
Of course, willing victims also clearly failed to do a shred of their own independent DD. I sure as hell hope they didn't learn the wrong lesson from all this although some of the posts here remain tragic...
 
 
Section 382 and bankruptcy:
When a creditor exchanges debt for equity in the debtor, the exchange may trigger an ownership change for section 382 purposes. However, an exception applies under which such exchanges are disregarded if (i) the debtor is under the jurisdiction of a court in a Title 11 or similar case, and (ii) the historic shareholders and/or historic creditors own in the aggregate at least 50% of the stock of the company following the restructuring (the “382(l)(5) exception”). This exception comes at two “costs”:
 — The company must re-compute its taxable income/loss for the tax year of the exchange and the three proceeding tax years, by excluding any interest deductions related to the debt that was exchanged by qualified creditors for stock in the debt for equity exchange.
 — If there is another ownership change during the twoyear period following the restructuring, the section 382 limitation with respect to that subsequent ownership change will be zero.



Sec 382 l5 and 382 l6
[Scroll down to the secion labelled: Secs. 382(l)(5) and 382(l)(6)]

"A company that qualifies under Sec. 382(l)(5) can use its prechange NOLs in full, unrestricted by the Sec. 382 limitation. To qualify, the corporation: [see link for details]"



 


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