The ownership and trading of debt claims in Chapter 11 restructurings

Victoria Ivashina, Benjamin Iverson and David C. Smith

Journal of Financial Economics, 2016, vol. 119, issue 2, 316-335

Abstract: Using a novel data set that covers individual debt claims against 136 bankrupt US companies and includes information on a subset of claims transfers, we provide new empirical insight regarding how a firm’s debt ownership relates to bankruptcy outcomes. Firms with higher debt concentration at the start of the case are more likely to file prearranged bankruptcy plans, to move quickly through the restructuring process, and to emerge successfully as independent going concerns. Moreover, higher ownership concentration within a debt class is associated with higher recovery rates to that class. Trading of claims during bankruptcy concentrates ownership further, but this trading is not associated with subsequent improvements in bankruptcy outcomes and could, at the margin, increase the likelihood of liquidation.

Keywords: Chapter 11; Ownership structure; Distressed debt; Trading in bankruptcy (search for similar items in EconPapers)
JEL-codes: G23 G33 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (33)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:119:y:2016:i:2:p:316-335

DOI: 10.1016/j.jfineco.2015.09.002

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