Abstract

http://ssrn.com/abstract=2001467
 
 

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Do Empty Creditors Matter? Evidence from Distressed Exchange Offers


Andras Danis


Georgia Institute of Technology

December 2, 2013


Abstract:     
We examine the effect of credit default swaps (CDSs) on the restructuring of distressed firms. Theoretically, we show that if bondholders are insured with CDSs, the participation rate in a restructuring decreases. Using a sample of distressed exchange offers, we estimate that the participation rate is 29% lower if the firm has CDSs traded on its debt, compared to an unconditional mean of 54%. We use the introduction of the Big Bang protocol as a natural experiment. The results suggest that firms with CDSs find it difficult to reduce debt out-of-court, which is inefficient because it increases the likelihood of future bankruptcy.

Number of Pages in PDF File: 60

Keywords: CDS, empty creditors, distressed exchange offer, restructuring, bankruptcy

JEL Classification: G33, G34

working papers series


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Date posted: February 8, 2012 ; Last revised: December 3, 2013

Suggested Citation

Danis, Andras, Do Empty Creditors Matter? Evidence from Distressed Exchange Offers (December 2, 2013). Available at SSRN: http://ssrn.com/abstract=2001467 or http://dx.doi.org/10.2139/ssrn.2001467

Contact Information

Andras Danis (Contact Author)
Georgia Institute of Technology ( email )
Atlanta, GA 30332
United States
HOME PAGE: http://scheller.gatech.edu/danis
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