Debt Restructurings, Holdouts, and Exit Consents

Daniels, Kenneth; Ramirez, Gabriel G.

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Debt Restructurings, Holdouts, and Exit Consents

Journal of Financial Stability, Vol. 3, pp. 1-17, 2007

34 Pages Posted: 27 Mar 2007 Last revised: 23 Apr 2020

See all articles by Kenneth Daniels

Kenneth Daniels

Daniels Foundation for Impact Investments and Development; Daniels Foundation for Impact Investments and Development

Gabriel G. Ramirez

Kennesaw State University - Michael J. Coles College of Business

Abstract

This paper investigates the use of exit consents in a sample of bond exchange offers. We find that exit consents are common, approximately 56% of the exchange offers in our sample have them and 60% of the exit consents are by non-financially distressed firms. Using a probit model, we find that a set of variables that proxy for hold out problems is able to significantly explain the use of exit consents. Reducing holdouts is necessary for timely and efficient debt restructurings and achieving financial stability particularly in sovereign debt markets.

Keywords: Exit consents, debt restructuring, workouts, consent solicitation, debt renegotiation, exchange offers, tender offers, coercion, and holdouts

JEL Classification: G32

Suggested Citation: Suggested Citation

Daniels, Kenneth and Ramirez, Gabriel G., Debt Restructurings, Holdouts, and Exit Consents. Journal of Financial Stability, Vol. 3, pp. 1-17, 2007, Available at SSRN: https://ssrn.com/abstract=975242