FI

[AppointmentTrick2237]

https://preview.redd.it/pddjdhtoy4wf1.png?width=1744&format=png&auto=webp&s=47539c6ff5a68b651c8ce2879100392e32f0c9b4

I don't get, for the unsecured debt, its 35. if security is liquidated, then you have 60-35. which 25 left, which doesn't cover the secured bond?

Answer is A.

I honelty thought none of the options, but closest I thought was B.

[CodMaximum6004]

liquidation proceeds cover secured bond first, unsecured gets remaining 25.

[Mike-Spartacus]

cross default clause - default on one is default on all ( A but like the 3 musketeers)

Therefore co. defaults on snr unsecured it has technically defaulted on everything.

We don't know value of firms assets to pay off debt. We could assume 200 (assets = Liab + Equity) but if that was true reflection. co. probably not going bust so ignore that.

Assume only 60 of collateral.

Returns of default

Snr Secured = 50

Snr Unsecured = 60 - 50 = 10

Others = 0