Journal Article10.2139/SSRN.2684225
Do Bondholders Value Senior Loan Lender Control Rights
Bo Li,Lynnette D. Purda,Wei Wang +2 more
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TL;DR: In this article, the authors find that senior loan lender control is positively associated with the corporate bond yield spread at the time of the loan issue, and that the effect is more pronounced for issuers whose bondholders are dispersed or have weak shareholder presence.
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Abstract: We find that senior loan lender control is positively associated with the corporate bond yield spread at issuance. A one standard deviation change in covenant intensity on a firm’s strictest loan is associated with a 20 basis points (bps) increase in its bond yield spread. The effect is more pronounced for issuers whose bondholders are dispersed or have weak shareholder presence. Our identification primarily relies on using lender-specific shocks as an instrument. Our results suggest that bondholders negatively price senior loan lender control rights outside of financial distress, despite the monitoring benefits they may provide.
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Citations
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Some evidence on the uniqueness of bank loans
TL;DR: In this article, the authors present evidence that banks provide some special service with their lending activity that is not available from other lenders, and they find evidence that bank borrowers, not CD holders, bear the cost of reserve requirements on CDs.
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Insolvency Resolution and the Missing High Yield Bond Markets
Bo Becker,Jens Josephson +1 more
TL;DR: In this paper, the authors developed a model of corporate credit markets in such an environment and found that efficient bankruptcy should be associated with more bond issuance by high-risk borrowers, and that both predictions hold both cross-country and using insolvency reforms as natural experiments.
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Bank Interventions and Trade Credit: Evidence from Debt Covenant Violations
TL;DR: In this article, the consequences of conflicts between creditors are examined using the setting of debt covenant violations, and the authors investigate how bank interventions on their borrowers affect the borrowers' trade credit.
References
Debt Covenant Renegotiations and Creditor Control Rights
David J. Denis,Jing Wang +1 more
TL;DR: In this article, a large sample of private debt renegotiations from 1996 to 2011 was used to show that even in the absence of any covenant violation, debt covenants are frequently renegotiated, and that these renegotiations primarily relax existing restrictions and result in economically large changes in existing limits.
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Does the Tail Wag the Dog? The Effect of Credit Default Swaps on Credit Risk
TL;DR: In this paper, the authors used a unique, comprehensive sample covering 901 CDS introductions on North American corporate issuers between June 1997 and April 2009 to address the question of whether trading in credit default swaps (CDS) increases the credit risk of the reference entities.
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Optimal Debt Structure and the Number of Creditors
TL;DR: In this paper, the optimal number of creditors a company borrows from and allocation of security interests among creditors and intercreditor voting rules that govern renegotiation of debt contracts are analyzed within an optimal contracting framework.
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Hedge Funds and Chapter 11
TL;DR: In this paper, the presence of hedge funds in the Chapter 11 process and their effects on bankruptcy outcomes is studied. But the authors focus on unsecured creditors and do not address the impact of hedge fund presence on secured creditors.
132
Top Management Incentives and the Pricing of Corporate Public Debt
Hernan Ortiz-Molina
- 01 Jan 2016
TL;DR: In this article, the authors examined the relationship between managerial ownership structure and at-issue yield spreads on corpo rate bonds and found that managers' stock options have a larger effect on yield spreads than stock ownership.
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