Abstract: In times of low liquidity for a firm, poison put bondholders can threaten to either force the company into a reorganization or to raise its borrowing costs. A multilateral bargaining solution for the strategic value is formulated at the time of exercise. Even infinitesimal bondholders, putting non-cooperatively, are able to extract more than the intrinsic value whenever the amount of putable debt exceeds the firm's effective liquidity. Prior to the crisis all financial assets are priced in a continous-time framework when interest rates follow the Vasicek process and firm's debtholders are subject to a sharp price decline due to an LBO. The model is calibrated to one such recent crisis --- that of Kmart Corp.

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