Bond Exchange Offers or Collective Action Clauses?

Hege, Ulrich and Mella-Barral, Pierre (2019) Bond Exchange Offers or Collective Action Clauses? TSE Working Paper, n. 19-1016, Toulouse

[img]
Preview
Text
Download (515kB) | Preview
Official URL: https://www.tse-fr.eu/sites/default/files/TSE/docu...

Abstract

This paper examines two prominent approaches to design efficient mechanisms for debt renegotiation with dispersed bondholders: debt exchange offers that promise enhanced liquidation rights to a restricted number of tendering bondholders (favored under U.S. law), and collective action clauses that allow to alter core bond terms after a majority vote (favored under U.K. law). We use a dynamic contingent claims model with a debt overhang problem, where both hold-out and hold-in problems are present. We show that the former leads to a more efficient mitigation of the debt overhang problem than the latter. Dispersed debt is desirable, as exchange offers also achieve a larger and more efficient debt reduction relative to debt held by a single creditor.

Item Type: Monograph (Working Paper)
Language: English
Date: June 2019
Place of Publication: Toulouse
Uncontrolled Keywords: Out-of-court Restructuring, Exchange Offer, Collective Action Clause, Exit Consent, Hold-out problem, Hold-in Problem, Trust Indenture Act.
JEL codes: G12 - Asset Pricing; Trading volume; Bond Interest Rates
G32 - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure
G33 - Bankruptcy; Liquidation
Subjects: B- ECONOMIE ET FINANCE
Divisions: TSE-R (Toulouse)
Institution: Université Toulouse 1 Capitole
Site: UT1
Date Deposited: 12 Jun 2019 07:55
Last Modified: 12 Jun 2019 07:55
OAI ID: oai:tse-fr.eu:123086
URI: http://publications.ut-capitole.fr/id/eprint/32536

Actions (login required)

View Item View Item

Downloads

Downloads per month over past year