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Debt Valuation and Chapter 22

Author

Listed:
  • Adriana Breccia

    (Department of Economics, Mathematics & Statistics, Birkbeck)

  • William Perraudin

    (Imperial College London)

Abstract

Numerous studies have examined the effect on credit spreads of renegotiation. These studies have generally focused on the impact on spread levels in general, and not on how renegotiation influences the relative pricing of senior versus junior debt claims. In this paper, we show that the scope for sequential renegotiation may reduce and even eliminate the premium for debt seniority. Our analysis also explains why companies may engage in repeated Chapter 11 bankruptcy filings (a phenomenon commonly referred to as Chapter 22).

Suggested Citation

  • Adriana Breccia & William Perraudin, 2010. "Debt Valuation and Chapter 22," Birkbeck Working Papers in Economics and Finance 1015, Birkbeck, Department of Economics, Mathematics & Statistics.
    • Handle: RePEc:bbk:bbkefp:1015
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    File URL: https://eprints.bbk.ac.uk/id/eprint/7524
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    References listed on IDEAS

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