Empty Creditors and Distressed Debt Restructuring

Narayanan, Rajesh P.; Uzmanoglu, Cihan

doi:10.2139/ssrn.2024374

Cited by 9 publications

(7 citation statements)

References 24 publications

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“…In all instances, the differences are statistically significant. Collectively, the results augment previous findings and indicate that bigger, profitable firms with lower levels of bank debt are most likely to be successful at restructuring (Gilson et al, 1990;Brunner and Krahnen, 2001;Narayanan and Uzmanoglu, 2018) Notes: Negative number in Panel A refers to equity stripping. *,**,***Denote statistical significance at 10, 5 and 1 percent, respectively 7.2 Determinants of equity injections Advancing the argument further, we regress the probability of additional equity brought in by the firm as a function of firm characteristics, including ownership.…”

Section: Sajbs 81supporting

confidence: 77%

Corporate distress, troubled debt restructurings and equity stripping

Ghosh

2019

SAJBS

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Purpose The focus on excessive corporate leverage as a key factor influencing bank loan delinquency has come into sharp focus in recent times. However, not much analysis has been undertaken on the factors driving corporate distress in emerging economies. Focusing on India as a case study, the purpose of this paper is to investigate the impact of a particular category of corporate debt restructuring (CDR) proposed by the Indian central bank over the last decade in leading an attempt to address bank loan delinquencies, the authors assess the factors influencing the quantum of restructured debt at the corporate level over the time period 2003–2012. Design/methodology/approach Besides univariate analysis, the authors use logit regression techniques to analyze the factors driving CDR outcomes in India. Findings The results suggest that firms that successfully exit the debt restructuring process are more profitable and less levered and spend a longer time in such restructuring. Little net equity enters these restructured firms, while there is some evidence of equity stripping, particularly in firms with greater promoter control. Originality/value To the best of our knowledge, this is one of the early studies that employ micro-level data to make a comprehensive assessment of the factors driving CDR for a leading emerging economy.

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Section: Sajbs 81supporting

confidence: 77%

Corporate distress, troubled debt restructurings and equity stripping

Ghosh

2019

SAJBS

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“…Other related contributions investigate the empty creditor predictions by comparing distressed exchange offers in reference entities and other firms and report mixed results. Danis () documents a lower participation rate to distressed exchanges in reference entities, while Narayanan and Uzmanoglu () argue that firms successfully respond to the resistance of empty creditors by restructuring their debt strategically. We complement these studies by looking at the full set of in‐ and out‐of‐court renegotiations, which enables us to directly assess the impact of credit insurance on the final restructuring choice.…”

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confidence: 99%

Distressed Debt Restructuring in the Presence of Credit Default Swaps

Bedendo¹,

Cathcart²,

El-Jahel³

2016

Journal of Money, Credit and Banking

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The availability of credit insurance via credit default swaps has been closely associated with the emergence of empty creditors. We empirically investigate this issue by looking at the debt restructurings (distressed exchanges and bankruptcy filings) of rated, nonfinancial U.S. companies over the period January 2007–June 2011. Using different proxies for the existence of insured creditors, we do not find evidence that the access to credit insurance favors bankruptcy over a debt workout. However, we document higher recovery prices following a distressed exchange in firms where empty creditors are more likely to emerge.

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“…One could alternatively examine the related hypothesis that CDS trading reduces the success rate of restructuring for distressed firms. This latter question has been addressed in three complementary studies, albeit with smaller samples, by Bedendo, Cathcart, and El-Jahel (2012), Danis (2012) and Narayanan and Uzmanoglu (2012), with conflicting conclusions. While Danis (2012) finds significant impact of CDS trading on restructuring, Bedendo, Cathcart, and El-Jahel (2012) and Narayanan and Uzmanoglu (2012) fail to find such effects.…”

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confidence: 99%