the web's biggest credit risk modeling resource.

Credit Jobs

Home Glossary Links FAQ / About Site Guide Search

Submit Your Paper

In Rememberance: World Trade Center (WTC)

Export citation to:
- Text (plain)
- BibTeX

James, Christopher, "When Do Banks Take Equity in Debt Restructurings?", Review of Financial Studies, Vol. 8, No. 4, (Winter 1995), pp. 1209-1234.

Abstract: This article examines the conditions under which bank lenders make concessions by taking equity in financially distressed firms. I show that the role banks play in debt restructurings depends on the Financial condition of the firm, the existence of public debt in the firm's capital structure and the ability of public debt to be restructured Empirically, I find that for firms with public debt outstanding banks never make concessions unless public debtholders also restructure their claims. When banks do take equity, on average they obtain a substantial proportion of the firm's stock, and they maintain their position for over two years.