Blocking stake
Capital MarketsA holding large enough to stop a class approving a restructuring, which is one unit above the complement of the required majority.
Also written: blocking position, blocking minority
Every consent threshold has an arithmetic mirror. If a class approves at 75% by value, anything above 25% of that class prevents approval. If it approves at two thirds, the blocking line sits above a third. If the decision needs every affected holder, as the money terms of a bond or a loan usually do, a single holder of any size can block it.
That makes position size a governance decision rather than only a return decision. A fund that buys past the blocking line has bought a claim and a vote, and distressed funds buy to that line deliberately rather than by accident.
Be precise about what it delivers. A blocking stake stops a class approving; it does not stop the restructuring. In a forum with cross class cram down the company can ask the court to bind the class anyway, so what the blocking holder really owns is the cost it can impose: delay, contested valuation evidence, and the risk that the court declines.
The line moves with the forum, which is why the same holding is worth different things in different places. An English plan and the German framework need 75% of a class by value, while the Dutch procedure needs two thirds of those voting, so a stake that blocks in Frankfurt may not block in Amsterdam.
Worked example
A class of notes has a face value of 300 and approves at 75% by value, illustratively.
A fund buys 90 of face, which is 30% of the class and therefore above the 25% blocking line, so the class cannot approve without it.
The company's choice is then to improve the terms or to ask the court to cram the class down, which is exactly the cost the fund paid for.