Debt Renegotiations outside Distress

60 Pages Posted: 4 Jun 2018 Last revised: 19 May 2022

See all articles by Marc Arnold

Marc Arnold

University of St. Gallen - School of Finance; Swiss Finance Institute

Ramona Westermann

Copenhagen Business School

Multiple version iconThere are 2 versions of this paper

Date Written: March 1, 2022


This paper develops a model to explore the implications of non-distressed debt renegotiation on debt prices and corporate policies. The model incorporates the empirical observation that creditors can influence firms also outside corporate distress through debt covenant renegotiation and not only in distress. We find that considering both distressed and non-distressed creditor interventions is key to investigating how creditor governance affects firms. The model explains cross-sectional patterns of control premiums and credit spreads that traditional debt renegotiation models do not capture. We also derive novel implications for the impact of firm characteristics associated with renegotiation on debt prices and corporate policies.

Keywords: Debt Renegotiation, Creditor Governance, Debt Pricing

JEL Classification: D92, E44, G12, G32, G33

Suggested Citation

Arnold, Marc and Westermann, Ramona, Debt Renegotiations outside Distress (March 1, 2022). Paris December 2018 Finance Meeting EUROFIDAI - AFFI, Available at SSRN: or

Marc Arnold (Contact Author)

University of St. Gallen - School of Finance ( email )

Unterer Graben 21
St.Gallen, CH-9000

Swiss Finance Institute ( email )

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4

Ramona Westermann

Copenhagen Business School ( email )

Solbjerg Plads 3
Frederiksberg C, DK - 2000

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