Why Would Creditors Be Willing to Give a Portion of What

Multiple Choice

Why would creditors be willing to give a portion of what they are owed by the debtor firm for equity in the reorganized firm?

A) They are legally obligated to do so under U.S. bankruptcy law.
B) Ownership in a firm is inherently more valuable than being a creditor.
C) The value of the stock may in the long run far exceed the amount of debt the creditors were willing to forgive.
D) Creditors understand that they can sue the firm at a later date for what they are owed.
E) None of the above.