Corporate Debt Restructuring: Evidence on Lending Coordination in Financial Distress

41 Pages Posted: 13 Nov 2001

See all articles by Antje Brunner

Antje Brunner

Humboldt University of Berlin

Jan Pieter Krahnen

Goethe University Frankfurt

Date Written: October 2001

Abstract

We analyse the coordination problem in multi-creditor relationships empirically, relying on a unique panel data set that contains detailed credit-file information on distressed lending relationships in Germany, including information on creditor pools, a legal institution aiming at coordinating lender interests in borrower distress. We report three major findings. First, the existence of creditor pools increases the probability of workout success. Second, the results are consistent with coordination costs being positively related to pool size. Third, major determinants of pool formation are found to be the number of banks, the distribution of lending shares, and the severity of the distress shock.

Keywords: Bank lending, distress, workout, coordination risk

JEL Classification: D74, G21, G33, G34

Suggested Citation

Brunner, Antje and Krahnen, Jan Pieter, Corporate Debt Restructuring: Evidence on Lending Coordination in Financial Distress (October 2001). Available at SSRN: https://ssrn.com/abstract=290388

Antje Brunner

Humboldt University of Berlin ( email )

Unter den Linden 6
D-10178 Berlin, AK 10099
Germany
+49 30 4748 3880 (Phone)

Jan Pieter Krahnen (Contact Author)

Goethe University Frankfurt ( email )

Grüneburgplatz 1
Frankfurt am Main, 60323
Germany

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