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Optimal Debt Exchange Offers

Author

Listed:
  • Pierre Mella-Barral

    (HEC Paris - Recherche - Hors Laboratoire - HEC Paris - Ecole des Hautes Etudes Commerciales)

Abstract

This paper examines the pricing and efficiency implications of debt exchange offers. The continuous-time model employed yields simple asset pricing formulae as well as closed-form solutions for the parameters characterising optimal debt exchanges offers. Polar cases are examined in which the debt is either held by a single bank or by many bond-holders, that is respectively private or public debt. A comparative analysis of the efficiency properties of each form of debt yields the interesting finding that under the often criticised exit-consent provision, optimal public debt exchange offers are ex-ante the most efficient.

Suggested Citation

  • Pierre Mella-Barral, 1995. "Optimal Debt Exchange Offers," Working Papers hal-00607533, HAL.
    • Handle: RePEc:hal:wpaper:hal-00607533
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    Citations

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    Cited by:

    1. Anderson, Ronald W. & Tu, Cheng, 1996. "Numerical analysis of strategic contingent claims models," LIDAM Discussion Papers IRES 1997004, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES), revised 00 Jan 1997.
    2. Ulrich Hege & Pierre Mella-Barral, 2019. "Bond Exchange Offers or Collective Action Clauses?," Finance, Presses universitaires de Grenoble, vol. 40(3), pages 77-119.
    3. Jianjun Miao, 2005. "Optimal Capital Structure and Industry Dynamics," Journal of Finance, American Finance Association, vol. 60(6), pages 2621-2659, December.
    4. Moraux, Franck & Silaghi, Florina, 2014. "Inside debt renegotiation: Optimal debt reduction, timing, and the number of rounds," Journal of Corporate Finance, Elsevier, vol. 27(C), pages 269-295.
    5. Anderson, Ronald W. & Sundaresan, Suresh & Tychon, Pierre, 1996. "Strategic analysis of contingent claims," European Economic Review, Elsevier, vol. 40(3-5), pages 871-881, April.
    6. Silaghi, Florina, 2018. "The use of equity financing in debt renegotiation," Journal of Economic Dynamics and Control, Elsevier, vol. 86(C), pages 123-143.

    More about this item

    Keywords

    exchange offers; corporate bonds; agency costs;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation

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