A Restructuring Tale: The Bank of Commerce

Richard Marney () and Timothy Stubbs ()
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Timothy Stubbs: Dentons

Chapter Chapter 1 in Corporate Debt Restructuring in Emerging Markets, 2021, pp 3-61 from Springer

Abstract: Abstract The case study, in the form of a narrative tale, depicts the Bank of Commerce, a troubled bank in a copper export-dependent emerging market. Its US-based majority shareholder has benefited from it as a source of cash for pay-outs to investors and part of a greater, overly ambitious acquisition strategy in other markets. As the local economy experiences major export revenue and currency shocks and the Bank’s financial condition deteriorates, we follow the responses of individual representatives of the Bank, its shareholders, and lenders to deal with the spiraling crisis. Eventually, a debt restructuring becomes inevitable. Efforts to maintain the Bank as a going concern flounder as the shareholders are unable to recapitalize the institution, a sale or merger proves unviable, and the lenders cannot agree on a debt to equity conversion solution. As a result, an orderly wind-down must be engineered as an alternative to bankruptcy. The tale and discussion questions interspersed in the text provide a real-life context for the remainder of the book.

Keywords: Bankruptcy; Basel III; Board of directors; Borrower; Confidentiality; Consensual restructuring; Coordinating committee; Corporate debt; Debt; Debtor; Debt to equity conversion; Deposits; Cash flow; Critical thinking; Currency peg; Devaluation; DFI (development finance institution); Distressed debt; Duration gap; Foreign exchange; Emerging market; Exchange rate; Frontier market; INSOL II; INSOL principles; Insolvency; Lender leadership; Loan loss provision; New money; Non-performing loans; Pre-insolvency; Restructure; Restructuring; Restructuring plan; Shareholder(s; Standstill; Steering committee; Tier 1 Capital; Tier 2 Capital; Wind-down; Workout (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1007/978-3-030-81306-2_1

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