Distressed Debt Restructuring in the Presence of Credit Default Swaps

41 Pages Posted: 27 Aug 2010 Last revised: 15 Jan 2015

Mascia Bedendo

Audencia Nantes School of Management; Bocconi University - CAREFIN - Centre for Applied Research in Finance

Lara Cathcart

Imperial College Business School

Lina El-Jahel

University of Auckland - Business School

Multiple version iconThere are 2 versions of this paper

Date Written: December 10, 2014

Abstract

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.

Keywords: Credit default swaps, empty creditors, debt restructuring

JEL Classification: E51, G32, G33

Suggested Citation

Bedendo, Mascia and Cathcart, Lara and El-Jahel, Lina, Distressed Debt Restructuring in the Presence of Credit Default Swaps (December 10, 2014). Journal of Money, Credit, and Banking, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1666101 or http://dx.doi.org/10.2139/ssrn.1666101

Mascia Bedendo (Contact Author)

Audencia Nantes School of Management ( email )

8 route de la Jonelière, BP 31222
Nantes, 44312
France

Bocconi University - CAREFIN - Centre for Applied Research in Finance ( email )

Via Sarfatti, 25
Milan, 20136
Italy

Lara Cathcart

Imperial College Business School ( email )

South Kensington Campus
Exhibition Road
London SW7 2AZ, SW7 2AZ
United Kingdom
+44 (0) 20 7594 9126 (Phone)
+44 (0) 20 7594 9189 (Fax)

Lina El-Jahel

University of Auckland - Business School ( email )

12 Grafton Rd
Auckland, 1010
New Zealand

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