Activist Investors, Distressed Companies, and Value Uncertainty

29 Pages Posted: 21 Oct 2013 Last revised: 31 Mar 2014

Michelle M. Harner

University of Maryland Francis King Carey School of Law

Jamie Marincic Griffin

University of Michigan at Ann Arbor

Jennifer Ivey-Crickenberger

University of Maryland Francis King Carey School of Law

Date Written: 2014

Abstract

Hedge funds, private equity firms, and other alternative investment funds are frequently key players in corporate restructurings. Most commentators agree that the presence of a fund can change the dynamics of a chapter 11 case. They cannot agree, however, on the impact of this change — i.e., do funds create or destroy enterprise value? This essay contributes to the dialogue by analyzing data from chapter 11 cases in which funds are in a position to influence the debtor’s exit strategy. The data shed light on what such funds might achieve in chapter 11 cases and the potential implications for debtors and their other stakeholders. Although additional research is needed, the preliminary data suggest that the value of fund participation in chapter 11 cases likely depends on whom you ask and where they sit in the particular debtor’s capital structure.

Keywords: hedge funds, activist investors, alternative investment funds, chapter 11, restructuring, distressed debt, distressed investing, reorganization, loan-to-own

Suggested Citation

Harner, Michelle M. and Marincic Griffin, Jamie and Ivey-Crickenberger, Jennifer, Activist Investors, Distressed Companies, and Value Uncertainty (2014). American Bankruptcy Institute Law Review , Vol. 22, 2014, p. 167-194; U of Maryland Legal Studies Research Paper No. 2013-62. Available at SSRN: https://ssrn.com/abstract=2343100

Michelle M. Harner (Contact Author)

University of Maryland Francis King Carey School of Law ( email )

500 West Baltimore Street
Baltimore, MD 21201-1786
United States
410-706-4238 (Phone)

Jamie Marincic Griffin

University of Michigan at Ann Arbor ( email )

500 S. State Street
Ann Arbor, MI 48109
United States

Jennifer Ivey-Crickenberger

University of Maryland Francis King Carey School of Law ( email )

500 West Baltimore Street
Baltimore, MD 21201-1786
United States

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