The Re-Emergence of Distressed Exchanges in Corporate Restructurings

18 Pages Posted: 8 Sep 2009

See all articles by Edward I. Altman

Edward I. Altman

New York University (NYU) - Salomon Center; New York University (NYU) - Department of Finance

Brenda Karlin

affiliation not provided to SSRN

Date Written: March 1, 2009

Abstract

In 2008 and 2009, bondholders of ailing companies were affected by a reemergenceof an important corporate restructuring strategy, known as a Distressed Exchange.Fourteen companies in 2008 completed this desperate attempt to avoid a formal bankruptcy filing – about twice as many as any single year in the last 25 years, involving twice as much in dollar amount than in the entire prior history (1984-2007). And, in just the first fourmonths of 2009, nine firms have already completed distressed exchanges. The recovery rate to bondholders participating in distressed exchanges over the last 25 years is significantly higher than recoveries on other, more dramatic types of default – namely payment defaults and bankruptcies. But, there is no guarantee that a distressed exchange will permanently immunize the firm from further distress, with almost 50% of all companies completing distressed exchanges prior to 2008 ultimately filing for bankruptcy.

Suggested Citation

Altman, Edward I. and Karlin, Brenda, The Re-Emergence of Distressed Exchanges in Corporate Restructurings (March 1, 2009). NYU Working Paper No. FIN-09-012, Available at SSRN: https://ssrn.com/abstract=1469130

Edward I. Altman (Contact Author)

New York University (NYU) - Salomon Center ( email )

44 West 4th Street
New York, NY 10012
United States
212-998-0709 (Phone)
212-995-4220 (Fax)

New York University (NYU) - Department of Finance ( email )

Stern School of Business
44 West 4th Street
New York, NY 10012-1126
United States

Brenda Karlin

affiliation not provided to SSRN

No Address Available

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