According to University of Chicago Law School professor Vincent Buccola and his colleagues in their newest paper, The Backstop Party, backstop fees—the compensation lenders receive for underwriting a post-Chapter 11 company's reemergence into capital markets—may be more than meets the eye.

Backstop arrangements allow a debtor to hedge against the risk that the market will undersubscribe to equity offerings post-bankruptcy. Essentially, the backstop pledges to purchase any shares not bought on the open market at a discount.

In an efficient world, the value of the discount is determined by the extent of the undersubscription risk. However, the authors believe the discount is far greater than the actual risk of undersubscription suggesting creditor groups that provide this security are being compensated for something more than insurance.