Securities Law Commons^™

An Economic Analysis Of The Potential For Coercion In Consent Solicitations For Bonds, Royce De R. Barondes

Faculty Publications

This Article examines why issuers frequently cannot present bondholders with an offer that draws on collective action problems to force the acceptance of the offer by the bondholders. The analysis is restricted to publicly offered bonds. For a number of reasons, privately placed debt presents fewer opportunities for coercion. A prior business relationship among various purchasers, which facilitates cooperation, may be more likely with respect to privately placed debt. Privately placed debt often has more significant protection for the bondholders than public debt with the same level of seniority