Collateral Allocation Mechanism Provisions in Bankruptcy

Summary

This practice note discusses collateral allocation mechanism (CAM) exchange provisions and their effect in bankruptcy cases. CAM exchange provisions are generally used in loan agreements with a tranche structure involving different currencies and/or different foreign jurisdictions to equalize recoveries for lenders with the allocation of payments on a pro rata basis. CAM exchange provisions are also referred to as collection allocation mechanisms and debt allocation mechanisms. For more information on tranche structures, see Tranches of Loans and Loan Mechanics in Credit Agreements.