This paper develops a model to assess the potential for unfairness in freeze-out bond covenant ex-change offers by highlighting the role played by coordination among bondholders. We show that (i) shareholders have an incentive to always structure an exchange offer unfairly and (ii) the coor-dination costs are positively related to the unfairness of the exchange offer. By improving coordi-nation, bondholders can obtain better contractual conditions not only with regard to exchange of-fers but also in bond issues.
The role of bondholder coordination in freeze-out exchange offers
Bazzana, Flavio;Broccardo, Eleonora
2013-01-01
Abstract
This paper develops a model to assess the potential for unfairness in freeze-out bond covenant ex-change offers by highlighting the role played by coordination among bondholders. We show that (i) shareholders have an incentive to always structure an exchange offer unfairly and (ii) the coor-dination costs are positively related to the unfairness of the exchange offer. By improving coordi-nation, bondholders can obtain better contractual conditions not only with regard to exchange of-fers but also in bond issues.File in questo prodotto:
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