Distressed Debt Restructuring in the Presence of Credit Default Swaps
Audencia Nantes School of Management; Bocconi University - CAREFIN - Centre for Applied Research in Finance
Imperial College Business School
University of Auckland - Business School
December 10, 2014
Journal of Money, Credit, and Banking, Forthcoming
The availability of credit insurance via credit default swaps (CDSs) 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, non-financial U.S. companies over the period Jan 2007 - Jun 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.
Number of Pages in PDF File: 41
Keywords: Credit default swaps, empty creditors, debt restructuring
JEL Classification: E51, G32, G33Accepted Paper Series
Date posted: August 27, 2010 ; Last revised: January 15, 2015
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