Vulture investors and the market for control of distressed firms

Article Abstract:

Vulture investors are external agents that come to the rescue of distressed firms. They may gain access to nondistressed firms via block acquisition of common stocks. They purchase more than one-third of a distressed firm's debt claims for positioning, and to give them voice over the terms of restructuring. Positions, such as the CEO or chairman, results in marked improvements on the distressed firm. Vulture investors known to possess skills in managing distressed companies proved to have some valuation effect, when announced to have gained control of the board.

Other Financial Vehicles, Investors, not elsewhere classified, Investors NEC, Finance & Stockholder Relations, Investors

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Coercive tender and exchange offers in distressed high-yield debt restructurings: an empirical analysis

Article Abstract:

The results of tender and exchange offers in the debt restructuring of financially troubled firms and the nature of the holdout problem were examined. In tender offers, debt is reacquired with cash while in exchange offers, previous debt is exchanged with new debt. The holdout problem refers to coercive techniques which bondholders use in restructuring debt in bankruptcy procedures. It was concluded that the financial status of a firm and the extent of the holdout problem are the most important factors in choosing tender or exchange offers.

Research, Tender offers (Securities), Tender offers, Bankruptcy reorganizations, Bankruptcy reorganization

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The information content of distressed restructurings involving public and private debt claims

Article Abstract:

The debt/equity offering structure used by financially troubled firms in restructuring is found to have an informational content about the value of company assets. When equity is offered to private lenders and senior debt offerings are made to public debtholders, positive abnormal average returns are found. A model is presented and tested in an empirical analysis of 63 debt restructurings. Assumed in the model is the absence of holdout problems among public debtholders, which has been recognized as an impediment to restructurings.

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