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Hege, Ulrich
and Mella-Barral, Pierre
(2019)
Bond Exchange Offers or Collective Action Clauses?
TSE Working Paper, n. 19-1016, Toulouse
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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 Classification: | 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: | 27 Oct 2021 13:37 |
| OAI Identifier: | oai:tse-fr.eu:123086 |
| URI: | https://publications.ut-capitole.fr/id/eprint/32536 |
