FIN.22:4.4 - Allocate value under each route’s actual claim treatment

Identify the relevant debtor or asset pool, secured and unsecured claims, guarantees, setoff or other material rights, and the applicable or proposed priority. Several entities or collateral pools cannot be combined into one distributable pot merely because they share owners. FDM.1–2 establish those boundaries. Use the responsible institutional interpretation when the effect of a right is disputed.

Work from the available net proceeds and apply the stated treatment in order. A senior capped claim receives no more than its allowed claim or the proceeds available to it; the remainder goes to the next permitted claim or class. Claimants sharing a class receive the allocation actually required by the arrangement, which may be proportional to their allowed claims. Equity receives only the residual under the stipulated treatment. These are calculation moves after the rights are established, not a universal legal priority schedule.

Allocate within each material scenario before calculating expected recoveries. Priority and caps are nonlinear. Allocating an expected total as though it were a certain pool can overstate junior or equity recovery and conceal senior loss in a low outcome. Keep the scenario probabilities, recovery dates and uncertainty grounds explicit. A range is more honest than an invented probability when only a range is supported.

When a plan offers cash, new debt and equity, value each actual instrument on matching grounds. Face amount is not the value of a delayed or risky promise. Use FIN.5 and FIN.7 for the claim-specific valuation, including its contingent rights and residual exposure. Use FIN.7’s bridge from enterprise value to the actual equity interest. Treating the full enterprise value as equity recovery while also crediting the debt claims would count their value twice. Preserve the difference between the allowed old claim, promised new treatment, expected payment and present value.