The ownership and trading of debt claims in Chapter 11 restructurings

Victoria Ivashina*, Benjamin Iverson, David C. Smith

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

26 Scopus citations

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.

Original languageEnglish (US)
Pages (from-to)316-335
Number of pages20
JournalJournal of Financial Economics
Volume119
Issue number2
DOIs
StatePublished - Feb 1 2016

Keywords

  • Chapter 11
  • Distressed debt
  • Ownership structure
  • Trading in bankruptcy

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics
  • Strategy and Management

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