Flavio Bazzana, Eleonora Broccardo

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The role of bondholder coordination in freeze-out exchange offers

  • Abstract

Informations and abstract

Keywords: Freeze-Out, Covenant; Bond; Coordination Costs (JEL Codes: G12, G32)

This paper develops a model to assess the potential for unfairness in freeze-out bond covenant exchange 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 coordination costs are positively related to the unfairness of the exchange offer. By improving coordination, bondholders can obtain better contractual conditions, not only with regard to exchange offers, but also in bond issues.

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