Determinants of financial distress and bankruptcy in highly levered transactions
AbstractPrior literature on highly levered transactions (levered buyouts or levered recapitalizations) has emphasized either changes in governance or the structuring of their financing in helping these firms avoid financial distress or bankruptcy. Observing a sample of HLTs over time, we observe that debt composition is a more critical influence than proposed changes in governance for the likelihood of an HLT avoiding financial distress or bankruptcy. Such evidence is consistent with the [Chemmanur, T. & Fulghieri, P. (1994). Reputation, renegotiation, and the choice between bank loans and publicly traded debt. Review of Financial Studies 7, 475-506] model and suggests that the critical factor is the ability to informally renegotiate debt terms with a few lenders.
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Bibliographic InfoArticle provided by Elsevier in its journal The Quarterly Review of Economics and Finance.
Volume (Year): 49 (2009)
Issue (Month): 3 (August)
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Web page: http://www.elsevier.com/locate/inca/620167
Bankruptcy Financial distress HLT Levered buyouts Levered recapitalizations;
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