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Jared A. Ellias, The Shadowy Contours of Bankruptcy Resistant Investments, 114 Colum. L. Rev. Sidebar 123 (2014).

Abstract: Response to: Douglas G. Baird & Anthony J. Casey, No Exit? Withdrawal Rights and the Law of Corporate Reorganizations, 113 Colum. L. Rev. 1 (2013). Baird and Casey recently argued in favor of contractual innovations that allow lenders to contract around bankruptcy law. These innovations, which they call withdrawal rights, are said to increase the efficiency of financing in many cases, and Baird and Casey urge judges to enforce them. This brief Essay uses a case study of a Chapter 11 bankruptcy where withdrawal rights were enforced by operation of foreign law to challenge Baird and Casey's assumptions. The case study suggests that managers may lack a full understanding of how their actions ex ante effect bankruptcy outcomes. Substantial changes for managerial behavior and corporate regulation may be needed to allow managers and investors to utilize withdrawal rights when doing so would enhance the efficiency of financing.