Debt Holders and the Choice of Restructuring: Evidence from Dual Holders

Abstract

We find a channel through which debt holders can affect corporate transactions. We show that dual holders (equity holders who also have the firm's debt in their portfolio) are sensitive to a decline in debt value in a leveraged buyout and decrease the likelihood of LBOs. We show that the stock premium in LBO events is higher for a firm with dual holders due to their loss on their debt.

Keywords: leverage buyout, abnormal return, dual holding

JEL Classification: G32, G34