Secured Creditor Recovery Rates from Management Buy-Outs in Distress

26 Pages Posted: 12 Jun 2002

See all articles by Mike Wright

Mike Wright

Nottingham University Business School

David B. Citron

City University London - Sir John Cass Business School

Rod Ball

Nottingham University Business School

Fred Rippington

City University Business School, London

Date Written: February 2002

Abstract

Buy-out literature suggests that secured creditors will recoup substantial proportions of the funds they extend to finance the initial buy-out. This paper uses a unique dataset of 42 failed MBOs to examine the extent of credit recovery by secured lenders under UK insolvency procedures and the factors that influence the extent of this recovery. On average, secured creditors recover 62 per cent of the amount owed. The percentage of secured credit recovered is increased where the distressed buy-outs is sold as a going concern and where the principal reason for failure concerns managerial factors. The presence of a going concern qualification in the audit report and the size of the buy-out reduce the recovery rate by secured creditors.

Suggested Citation

Wright, Mike and Citron, David B. and Ball, Rod and Rippington, Fred, Secured Creditor Recovery Rates from Management Buy-Outs in Distress (February 2002). EFMA 2002 London Meetings, Cass Business School Research Paper, Available at SSRN: https://ssrn.com/abstract=313963 or http://dx.doi.org/10.2139/ssrn.313963

Mike Wright

Nottingham University Business School ( email )

Jubilee Campus
Wollaton Road
Nottingham, NG8 1BB
United Kingdom
+44 115 951 5257 (Phone)
+44 115 951 5204 (Fax)

David B. Citron (Contact Author)

City University London - Sir John Cass Business School ( email )

106 Bunhill Row
London, EC1Y 8TZ
United Kingdom
+44 207 040 8665 (Phone)
+44 207 040 8881 (Fax)

Rod Ball

Nottingham University Business School ( email )

Jubilee Campus, Wollaton Road
Centre for Management Buy-out Research
NG8 1BB Nottingham
United Kingdom
+44 (0) 115 9515091 (Phone)

Fred Rippington

City University Business School, London

Frobisher Crescent
Barbican Centre
London, EC1V OHB
United Kingdom

Do you want regular updates from SSRN on Twitter?

Paper statistics

Downloads
320
Abstract Views
2,294
rank
130,346
PlumX Metrics