Explore the vast range of titles available.

This paper aims to create a bondholders' protection index (BPI) and to investigate what the influence of this index would be on multimarket funds' allocation in corporate bonds. Understanding this relation is relevant because only about 1.36% of multimarket funds' portfolios correspond to debentures. This study advances the literature by covering a topic little discussed in a Brazilian context, proposing the creation of a BPI, which would be related to the number of automatic maturity clauses, which guarantee immediate payment to bondholders in cases of the rupture of a contract. This research comprised 926 debentures series issued in Brazil from 2009 to 2017, and 1,753 multimarket funds, which allocated some portfolios' percentage in these securities. In creating the BPI, we contemplated 15 restrictive clauses, which the most common correspond to negligent business performance, liquidation, dissolution and bankruptcy, and restrictions related to company structure. Moreover, we examined less common restrictive clauses as well, including indebtedness policy, shares issuance and amortization, and ratings downgrading. Regarding data analysis, we employed multiple linear regression models, with pooled estimators, applying the standard error correction by White's robust matrix (1980). The main results suggest that BPI positively effects multimarket funds' allocation in debentures. Furthermore, this influence is more intense in indentures with higher number of clauses with automatic maturity. Thus, this study contributes to literature about restrictive clauses, since it demonstrates that debentures' flexible and adaptable structure seems to be interesting for the main bondholders in Brazil.

Bond workouts are a famously dysfunctional method of debt restructuring. The process is so ridden with opportunistic and coercive behavior by both bondholders and bond issuers as to make success intrinsically unlikely. Yet since 2008 bond workouts have quietly started to work. A segment of the restructuring market has shifted from bankruptcy court to out-of-court workouts by way of exchange offers made only to large institutional investors. The new workouts feature a battery of strong-arm tactics by bond issuers, and aggrieved bondholders have complained in court. There resulted a new, broad reading of the primary law governing workouts, section 316(b) of the Trust Indenture Act of 1939 (TIA), which prohibits majority-vote amendments of bond payment terms and forces bond issuers seeking to restructure to resort to exchange offers. This Article exploits the bond market's reaction to the shift in law to reassess a longstanding debate in corporate finance regarding the desirability of TIA section 316(b). Section 316(b) has attracted intense criticism, with calls for its amendment or repeal because of its untoward effects on the workout process and tendency to push restructuring into the costly bankruptcy process. Yet section 316(b) has also been staunchly defended on the ground that mom-and-pop bondholders need protecti from sharp-elbowed issuer tactics. We draw on a pair of original, hand-collected data sets to show that many of th empirical assumptions made in the debate no longer hold true. We show that marke have learned to live with section 316(b)'s limitations, denuding the case for repeal any urgency. Workouts generally succeed, so that there is no serious transaction cost problem stemming from the TIA; when a company goes straight into bankruptcy th tend to be independent motivations. We also show that workout by majority amendment would not systematically disadvantage bondholders. Indeed, the recent turn to secured creditor control of bankruptcy proceedings makes direct amendment all the more attractive to unsecured bondholders. Based on this empirical background, we cautiously argue for the repeal of section 316(b). Section 316(b) no longer does much work, even as it prevents bondholde and bond issuers from realizing their preferences regarding modes of restructuring and voting rules. We do not know what contracting equilibrium would obtain followin repeal, but think that the matter is best left to the market. Still, we recognize that markets are imperfect and that a free-contracting regime may result in abuses. Accordingly, we argue that repeal of section 316(b) should be accompanied by the resuscitation of the long-forgotten doctrine of intercreditor good faith duties, which presents a more fact-sensitive and targeted tool for policing overreaching in bond workouts than the broad reading of section 316(b).

In December 2019, the Euro Summit did not approve the amendments to the ESM Treaty because of a disagreement among Member States on debt restructuring as a requirement for stability support in the case of unsustainable debt and questionable capacity of repayment. In this context, a key role is played by single-limb CACs which permit restructuring across all the bond series. On the one hand, this facilitates the restructuring process and neutralize the blocking action of vulture funds under single series. On the other hand, this poses some problems in relation to the protection of minor bondholders. The solution to these problems may come from inserting a sort of exemption clause in the model CACs that the EU Economic and Financial Committee is mandated to draft. This scenario is now exacerbated by the social and economic effects of the Covid-19 pandemic crisis that have caused a generalised increase in sovereign indebtedness and may imply debt restructuring. ESM treaty reform, debt restructuring, single-limb CACs, protection of minor bondholders, Covid-19 crisis

This article shows that country-level differences in creditor protection affect bond performance around cross-border M&A announcements. Using Eurobonds and a global sample of 1,100 cross-border M&As, we find that the bondholders of bidding firms respond more positively to deals that expose their firm to a jurisdiction with stronger creditor rights and more efficient claims enforcement through courts. Positive creditor protection spillovers are enhanced by now-global jurisdictional cooperation in multinational insolvencies and creditors' ability to do insolvency arbitrage. The spillover effects we observe are stronger for firms with higher asset risk, longer maturity bonds, and a higher likelihood of financial distress.

This article explores the role of European foreign debt holders as potential agents of informal imperialism in Latin America between 1820 and 1900. Through a historical-financial approach, it examines the formation of bondholder committees, their strategies to pressure debtor states, and their relations with European powers, especially Britain and France. While these committees sought to influence foreign policy, the author shows their success was limited and their ability to trigger state interventions was minimal. Nevertheless, they structured forms of collective negotiation, shaped financial market regulations, and, in some cases, imposed commitments on debtor states that affected their fiscal and economic sovereignty. The article analyzes key episodes such as the Latin American defaults of 1825, the Mexican case, and the Grace Contract in Peru, revealing tensions between private financial interests and governmental decisions. Ultimately, bondholders played a significant role in the international economic structure and should be given serious consideration in debates on informal imperialism and financial domination in the nineteenth century. As the century progressed, their strategies for organisation and collective action increased their capacity for influence at both the national and international levels. El artículo analiza el papel de los tenedores europeos de deuda externa como posibles agentes del imperialismo informal en América Latina entre 1820 y 1900. A través de un enfoque histórico-financiero, estudia la formación de comités de bonistas, sus estrategias de presión sobre gobiernos deudores y su relación con las potencias europeas, especialmente Gran Bretaña y Francia. Aunque los comités aspiraron a influir en las políticas exteriores, el autor muestra que sus éxitos fueron limitados y su capacidad de generar intervenciones estatales fue escasa. No obstante, lograron estructurar formas de negociación colectiva, condicionar marcos legales de los mercados financieros y, en algunos casos, imponer compromisos a los Estados deudores que afectaron su soberanía fiscal y económica. El texto analiza episodios clave como los defaults latinoamericanos de 1825, el caso mexicano y el contrato Grace en Perú, mostrando las tensiones entre intereses financieros privados y decisiones gubernamentales. Finalmente, se concluye que los tenedores desempeñaron un papel relevante en el entramado económico internacional, y que deben ser considerados seriamente en los debates sobre imperialismo informal y dominación financiera en el siglo XIX. A medida que avanzó el siglo sus estrategias de organización y acción colectiva incrementaron su capacidad de influencia tanto a nivel nacional como internacional

This paper unpacks the role of foreign bondholders committees in influencing market access following a default during the era before the creation of the British Corporation of Foreign Bondholders (CFB) in 1868. I argue that many ideas about this period need to be revisited. In particular, my evidence (which uses archival work to describe market microstructures) shows the importance of the London Stock Exchange (LSE) as a Court of Arbitration. I show how the LSE General Purpose Committee set up a system of Collective Action Clauses, requiring majority agreement among bondholders to permit market access. I argue that (unlike what research has argued thus far) this created powerful incentives for bondholders to get organized as they did. Previous models and historical 'lessons' need to be recast.

This study examines the relationship between firms’ corporate social responsibility (CSR) or environmental, social and governance performance and bondholders’ returns. We argue that bondholders are fixed claimants who only value firms’ CSR performance in relation to firms’ risks. We hypothesize that firms with CSR concerns or controversies tend to increase firms’ default risk which would adversely affect bondholders’ returns. We also argue that CSR investments (CSR strengths) increase the opportunity for residual claimants (i.e., shareholders) to shift the investment risk to the bondholders. Hence, CSR strengths represent higher asset substitution risk or risk-shifting. We argue that bondholders’ returns and the stakeholders’ interests are aligned when firms have CSR concerns or controversies but their interests are not aligned for CSR strengths since CSR strengths increase asset substitution risk for the bondholders. The alignment and misalignment between bondholders and stakeholders’ interests are moderated by bond maturities and are affected by a negative shock in the credit market. Analysing a sample of 5240 bonds in a portfolio setting from 425 U.S. companies during the pre-green bond era (2001–2014), we find evidence to support our hypotheses.

This paper studies the senior unsecured bondholders’ bail-in expectations and market monitoring following bail-in legislative events aimed at introducing new tools for subordination. We measure bail-in expectations using a difference in differences approach that compares the reaction to bail-in events of senior unsecured bonds to the reaction of non-bailinable bonds. Similarly, we measure senior unsecured bondholders’ monitoring activity by using a triple differencing analysis that compares the yield-risk sensitivity reaction of senior unsecured bonds with respect to that of non-bailinable bonds. Our results indicate unaffected bail-in expectations by senior unsecured bondholders who, accordingly, do not enhance their pricing of banks’ risk.