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Columbia Law School

Bankruptcy Law

1991

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Bondholder Coercion: The Problem Of Constrained Choice In Debt Tender Offers And Recapitalizations, John C. Coffee Jr., William A. Klein Jan 1991

Bondholder Coercion: The Problem Of Constrained Choice In Debt Tender Offers And Recapitalizations, John C. Coffee Jr., William A. Klein

Faculty Scholarship

The past decade saw the flourishing of risky, high-yield corporate debt, often called "junk" bonds. Too many companies took on too much debt, and the chickens are now coming home to roost as these bonds have begun to default with increasing frequency.The magnitude of the problem is potentially enormous; by one estimate, $318 billion of debt has either defaulted already or trades at yields indicating the market's skepticism that it will be repaid on maturity.

Facing the prospect of default, corporate issuers are seeking to restructure or recapitalize their financial structures at a correspondingly increased pace. The market ...