The Economics of Bankruptcy Reform
Экономика реформы законодательства о банкротстве
1992-06-01
SCID: 54.1/hwxf26w8
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absolute priorityall-equity firmbankruptcy procedurebankruptcy reformshareholder vote
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Abstract (AI)
We propose a new bankruptcy procedure. Initially, a firm's debts are cancelled, and cash and non-cash bids are solicited for the 'new" (all-equity) firm. Former claimants are given shares, or options to buy shares, in the new firm on the basis of absolute priority. Options are exercised once the bids are in. Finally, a shareholder vote is taken to select one of the bids.
Key Findings
1
Former claimants receive shares or options to purchase shares according to absolute priority.
2
Options are exercised after bids are submitted, followed by a shareholder vote selecting the winning bid.
3
The paper proposes a bankruptcy procedure that initially cancels all of a firm’s debts.
4
The procedure solicits both cash and non-cash bids for a reorganized, all-equity firm.
Research Object
a firm undergoing the proposed bankruptcy procedure
Research Subject
the procedure’s allocation of ownership and selection of a restructuring bid through debt cancellation, cash and non-cash bidding, absolute-priority shares or options, and shareholder voting
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1992-06-01
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