The Ownership and Trading of Debt Claims in Chapter 11 Restructurings (rescheduled)
Speaker
Abstract
| This paper explores a novel data set that identifies over 71,000 investors holding debt claims of 136 companies filing for U.S. Chapter 11 bankruptcy protection during the period 1998 to 2009. We investigate how concentration in debt ownership relates to Chapter11 restructurings, and how claims trading during the restructuring influences ownership concentration. Consistent with theoretical work, we find that the overall concentration of debt ownership increases the speed with which a restructuring is completed, both via pre-filing, out-of-court prepack/prearranged restructurings and traditional in-court proceedings. Increased concentration also leads to more frequent sales and lower observed recovery rates; an artifact we relate to strategic valuations by concentrated creditor classes. Our results indicate that concentration of debt ownership increases significantly over the course of the case. Alternative investors (assets management firms, hedge funds and private equity firms), an already relatively concentrated investor group, are the largest net buyers of claims in bankruptcy. The largest net sellers are dispersed nonfinancial corporations. Furthermore, we establish that trading during the case leads to higher concentration of ownership at the time of voting. |
Download paper |
| Contact information: |
| Viorel Roscovan |
