The senior subordinated note holders who will receive the company's new stock had $603 million in claims, which will be eliminated.

"As far as I know there have never been any defaults or complaints from note holders."

The issue also includes a "put" option, whereby note holders may redeem the notes in four years at a price of par.

Too few of the studio's 100 note holders, already owed $4.1 million in past-due interest, agreed to exchange their notes for debt and stock.

When an installment sale is structured properly, a note holder can borrow against the promised sum from a bank.

An agreement with the note holders would also ease the cash drain on the carrier.

Conflicts of interest can also arise with senior note holders when the manager has a claim on the deal's excess spread.

He also helped hold off the county's short-term note holders by convincing them to wait a year before getting the $800 million they are owed.

Negotiations are now under way between the note holders and the county to reach some accommodation, which is expected by next week.

Like any mortgagor, the note holders have a secured claim on the property in the event of bankruptcy.