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Bank Debt Restructuring under Belgian Court-Supervised Reorganization

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  • B. LEYMAN

    ()

  • K. SCHOORS

    ()

Abstract

We use a unique dataset to analyze the contract renegotiation between a debtor and its secured bank creditors during Belgian court-supervised reorganization. We find that secured banks with higher collateralization succeed in renegotiating higher debt repayments during the court-supervised post-confirmation stage. There is also mild evidence that secured bank creditors renegotiate higher loan repayments during the court-supervised post-confirmation stage if the debtor’s assets are more redeployable. The proceeds of asset sales are used to generously repay secured banks and there is some evidence that secured banks push for those sales. Our findings are consistent with theory suggesting that secured creditors prefer liquidation above court-supervised reorganization.

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File URL: http://www.feb.ugent.be/nl/Ondz/wp/Papers/wp_08_508.pdf
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Bibliographic Info

Paper provided by Ghent University, Faculty of Economics and Business Administration in its series Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium with number 08/508.

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Length: 34 pages
Date of creation: Apr 2008
Date of revision:
Handle: RePEc:rug:rugwps:08/508

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Related research

Keywords: Bankruptcy; bank lending; collateral; liquidation rights;

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Cited by:
  1. S. Balcaen & S. Manigart & H. Ooghe, 2009. "From distress to exit: determinants of the time to exit," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 09/588, Ghent University, Faculty of Economics and Business Administration.
  2. Sergei Ivashchenko, 2013. "Dynamic stochastic general equilibrium model with banks and endogenous defaults of firms," EUSP Deparment of Economics Working Paper Series Ec-02/13, European University at St. Petersburg, Department of Economics.
  3. Balcaen,S. & Buyze, J. & Ooghe,H., 2009. "Financial distress and firm exit: determinants of involuntary exits, voluntary liquidations and restructuring exits," Vlerick Leuven Gent Management School Working Paper Series 2009-21, Vlerick Leuven Gent Management School.

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