Bank Loans and Troubled Debt Restructurings

46 Pages Posted: 4 Oct 2013 Last revised: 17 Jun 2015

See all articles by Cem Demiroglu

Cem Demiroglu

Koc University, College of Administrative Sciences and Economics

Christopher M. James

University of Florida - Department of Finance, Insurance and Real Estate

Date Written: May 13, 2015

Abstract

This paper examines the relation between the number and type of lenders that participate in corporate loan facilities and the nature of troubled debt restructurings. We find that loans from traditional bank lenders are significantly easier to restructure out of court than loans from institutional lenders. We also find that the existence of a past banking relationship between the borrower and the lead arranger of a syndicated loan adversely affects the ease of restructuring. Finally, we find that reliance on loans that are held in part by collateralized loan obligations (CLOs) is positively related to the likelihood of a prepackaged bankruptcy, consistent with greater holdout problems when loans are held by CLOs. Overall, our findings suggest that the role of banks in the restructuring process is quite different when bank loans are diffusely held or securitized.

Keywords: debt restructuring; Chapter 11; bankruptcy; private workout; holdout problem; institutional loans; CLOs

JEL Classification: G21, G23, G33

Suggested Citation

Demiroglu, Cem and James, Christopher M., Bank Loans and Troubled Debt Restructurings (May 13, 2015). Journal of Financial Economics (JFE), Forthcoming. Available at SSRN: https://ssrn.com/abstract=2336007 or http://dx.doi.org/10.2139/ssrn.2336007

Cem Demiroglu (Contact Author)

Koc University, College of Administrative Sciences and Economics ( email )

Koc University
Sariyer
Istanbul, 34450
Turkey
90-212-338-1620 (Phone)
90-212-338-1653 (Fax)

HOME PAGE: http://https://sites.google.com/site/cemdemiroglu/

Christopher M. James

University of Florida - Department of Finance, Insurance and Real Estate ( email )

P.O. Box 117168
Gainesville, FL 32611-7168
United States
352-392-3486 (Phone)
352-392-0301 (Fax)

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
485
Abstract Views
2,619
rank
60,058
PlumX Metrics