Bank loans and troubled debt restructurings

Cem Demiroglu and Christopher James

Journal of Financial Economics, 2015, vol. 118, issue 1, 192-210

Abstract: This paper examines the relation between the number and type of lenders that participate in corporate loan facilities and the nature of troubled debt restructurings. We find that loans from traditional bank lenders are significantly easier to restructure out of court than loans from institutional lenders. We also find that the existence of a past banking relationship between the borrower and the lead arranger of a syndicated loan adversely affects the ease of restructuring. Finally, we find that reliance on loans that are held in part by collateralized loan obligations (CLOs) is positively related to the likelihood of a prepackaged bankruptcy, consistent with greater holdout problems when loans are held by CLOs. Overall, our findings suggest that the role of banks in the restructuring process is quite different when bank loans are diffusely held or securitized.

Keywords: Debt restructuring; Bankruptcy; Holdout problem; CLOs (search for similar items in EconPapers)
JEL-codes: G21 G23 G33 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (24)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0304405X15001245
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:118:y:2015:i:1:p:192-210

DOI: 10.1016/j.jfineco.2015.01.005

Access Statistics for this article

Journal of Financial Economics is currently edited by G. William Schwert

More articles in Journal of Financial Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().