Mitigating the Corporate Valuation Problem in Chapter 11 Reorganizations: Transferable Put Rights and Contingent Value Rights

Posted: 3 Jul 1998

See all articles by Donald B. Hausch

Donald B. Hausch

University of Wisconsin at Madison

James K. Seward

University of Wisconsin - Madison - Department of Finance, Investment and Banking

Date Written: December 1995

Abstract

Bebchuk (1988) advances a new methodology for allocating financial claims against a reorganized company that does not require inter- (or intra-) group bargaining, nor is it necessary to explicitly identify (or agree on) the value of the reorganized company. Despite its apparent attractiveness for the quick and efficient reallocation of reorganized firm value, some have suggested that the method may be too complicated for practical purposes. Thus, there is a gap between the theoretical appeal of the Bebchuk proposal and the practical realities of employing the technique in an actual bankruptcy reorganization. We show how that gap can be bridged (at least partially) with two recent financial innovations. We also describe the actual use of the financial innovations in two recent corporate bankruptcy reorganizations.

JEL Classification: G33, G34

Suggested Citation

Hausch, Donald B. and Seward, James K., Mitigating the Corporate Valuation Problem in Chapter 11 Reorganizations: Transferable Put Rights and Contingent Value Rights (December 1995). Available at SSRN: https://ssrn.com/abstract=10022

Donald B. Hausch

University of Wisconsin at Madison ( email )

975 University Avenue
Madison, WI 53706
United States

James K. Seward (Contact Author)

University of Wisconsin - Madison - Department of Finance, Investment and Banking ( email )

975 University Avenue
Madison, WI 53706
United States
608-263-2738 (Phone)
608-265-4195 (Fax)

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
1,031
PlumX Metrics