Hege, Ulrich and Mella-Barral, Pierre (2019) Bond Exchange Offers or Collective Action Clauses? Finance, 40. pp. 77-119.
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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: | Article |
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Language: | English |
Date: | March 2019 |
Refereed: | Yes |
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) |
Site: | UT1 |
Date Deposited: | 12 Jun 2019 07:57 |
Last Modified: | 27 Oct 2021 13:37 |
OAI Identifier: | oai:tse-fr.eu:123089 |
URI: | https://publications.ut-capitole.fr/id/eprint/32537 |