Debtor-in-Possession Financing. Sris Chatterjee * Upinder S. Dhillon ** Gabriel G. Ramírez *** Forthcoming Journal of Banking and Finance, 2005
|
|
- Robert Chase
- 8 years ago
- Views:
Transcription
1 Debtor-in-Possession Financing Sris Chatterjee * Upinder S. Dhillon ** Gabriel G. Ramírez *** Forthcoming Journal of Banking and Finance, 2005 * Corresponding Author Graduate Business School, Fordham University, New York, NY 10023, (212) , Fax (212) , chatterjee@mary.fordham.edu ** School of Management, Binghamton University, Binghamton, NY 13902, (607) , Fax (607) , dhillon@binghamton.edu *** Department of Economics and Finance, Michael J. Coles College of Business, Kennesaw State University, Kennesaw GA 30144, (770) , Fax (770) , gabriel@coles2.kennesaw.edu This is a substantially revised version of an earlier paper which was presented at the 1997 Financial Management Association and 1998 Western Finance Association meetings. We thank David Dubofsky, Mitch Drucker, Michael Fruscione, Jean Helwege, Venkat Subramaniam, James Seward, the editor, associate editor, and a anonymous referee for their helpful comments. We acknowledge that CIT and Chemical Bank provided some of the data for this study. Gerard Coscolluela, Cameron Cross, E.G. Kim, Yoshi Kimura, Kartik Raman, and Adel Shaikh provided valuable research assistance with data collection at various stages. The authors are responsible for any remaining errors. Electronic copy available at:
2 1 ABSTRACT Several recent papers have documented the benefits of Debtor-in-possession (DIP) financing in the restructuring of firms in Chapter 11. However, the view on benefits is not unanimous and some legal scholars have raised doubts about DIP financing s effects on debt-holders and the possibility of expropriative wealth transfers. In this paper we address this issue by analyzing both stock and bond price data for a comprehensive sample of DIP loans and find significant positive abnormal stock and bond returns at the announcement of DIP loans. Also, we do not find evidence of wealth transfers from junior to senior debt-holders. Further, we examine the DIP loan process in detail and we document important institutional features of DIP loans such as maturity, covenants, fees and interest charges. We find evidence of intense monitoring using covenants. We also find higher fees and charges associated with DIP loans. We argue that overall the results are consistent with the information processing role of financial intermediaries. JEL Classification Code : G21, G33 Keyword: Bankruptcy, Chapter 11, Bank Loan, DIP financing, DIP, Wealth Effects, Monitoring Costs. Electronic copy available at:
3 2 1. Introduction In this paper we provide additional evidence on Debtor-in-Possession (DIP) financing of distressed firms. We focus on two aspects of DIP loans:(1) DIP financing announcement effect on security prices, and (2) structure and characteristics of DIP loans. We analyze both stock and bond returns, and we do so for the largest DIP sample. Previous researchers have not examined bond price data, which allow us to examine whether DIP financing leads to wealth transfers as often suggested in the debate on the appropriateness of DIP loans. Financially distressed firms that restructure under Chapter 11 typically need financing for the continuation of business. Financing under Chapter 11 protection is called debtor-in-possession (DIP) financing. DIP financing is a unique form of secured financing available to firms filing for Chapter 11 under the U.S. Bankruptcy Code. The finance and legal literature provides arguments against secured financing such as DIP loans because these loans provide incentives for managers to undertake risky, possibly negative NPV projects, which is the overinvestment problem discussed in Gertner and Scharfstein (1991) and Triantis (1993). 1 However, John (1993) points out that DIP financing is valuable for firms in financial distress. Recent papers address the issue of whether DIP loans enhance the efficiency of reorganization in Chapter 11 focusing on explaining the benefits (role) of DIP financing. John and Vasudevan (1996) and Dhillon, Noe and Ramírez (1995) develop theoretical models in which DIP financing provides benefits either in the form of certification or signaling - the DIP loan is a positive signal of the firm s future prospects. Fayez and Meyer (2001), using a small sample of firms, find a correlation between the DIP announcement s positive stock price reaction and subsequent successful reorganization. Carapeto (2003) finds higher probability of successfully reorganization for DIP firms and positive effects 1 For an overview of the secured credit debate see White (1994). More specifically, Jensen and Meckling (1976) analyze the risk-shifting incentives associated with financial distress and Kanda and Levmore (1994) discuss the risk shifting resulting from secured borrowing in general.
4 3 of DIP loans on recovery rates at reorganization conditional on loans structure. A recent paper by Dahiya, John, Puri, and Ramírez (2003) finds that (1) DIP-financed firms have a shorter reorganization period (they are quicker to restructure under Chapter 11) and (2) contrary to perception, there is little evidence of systematic overinvestment in DIP-financed firms. Also, Triantis (1993) and to some extent Datta and Iskandar-Data (1995), and Chen, Weston, and Altman (1995) address the value added by new senior financing in reducing the underinvestment problem. In short, there is broad agreement that DIP financing is beneficial in the reorganization process. However, none of these studies look at assessing the benefits of DIP financing in terms of the market reaction of the firm s securities at the time of such loans are announced. In this paper we address to what extent are the benefits of DIP financing shared by both stockholders and bondholders of the distressed firms and if not, then whether the stockholder gains are at the expense of bondholder losses?. We also investigate how DIP loans are structured and how the DIP lender is compensated for the services rendered. We document a rapid growth of DIP financing during the latter part of the 1990s. The recent Chapter 11 filings of large publicly traded firms such as LTV Corp. (Dec 2000), AMF Bowling (July 2001), Bethlehem Steel Corp. (October 2001), WorldCom (July 2002) and United Airlines (December 2002) and the availability of DIP financing in these cases provide an example of the vital role of DIP financing in bankruptcy restructuring. We find positive stock and bond price reaction to the announcement of DIP financing. We also find evidence, based on a subsample with data available, that there is no wealth transfer from junior to senior bondholders. We contribute to the literature by showing that both stockholders and bondholders gain from the benefits of DIP financing as recognized by the market at the time of the announcement of such loans and that there is no wealth transfer resulting from the super-priority status given to these loans. Our analysis also shows that DIP loans are typically short-term revolving lines of credit that restrict the use of proceeds to working capital and that DIP loans incorporate a significant
5 20 Table 1 Sample Description Dollar figures are in millions. This table presents descriptive statistics for our sample of 185 Chapter 11 firms obtaining DIP financing and 424 Chapter 11 firms that did not obtain DIP financing during the period Panel A: Distribution of firms by year Year Number of Filing for Chapter 11 Number of Non-DIP Number of DIP DIP Percent of DIP Amount of DIP loan in millions Mean loan to total assets $ % % , % , % , % % % , % , % , % Total % $10,798 Panel B: Industry distribution a Industry Number of Filing for Chapter 11 Number of Non- DIP Number of DIP DIP Percent of DIP Amount of DIP loan in millions Mean loan to total assets Industrial manufacturing $ % Consumer manufacturing % Air Transportation % Retail , % Others , % Total $10,798 a SIC codes are classified as manufacturing industrial ( , , ), manufacturing consumers ( , , ), air transportation ( ), retail ( ), and others (1700, , , , and ).
6 21 Table 2 Stock and bond excess returns around the announcement of DIP loans This table presents security price reaction to the announcement of DIP approval. A market model using Scholes-Williams (1977) procedure to adjust for non-synchronous trading is used to compute standardized cumulative abnormal stock returns (SCARs) 1. A methodology similar to Warga and Welch (1993) is used to compute monthly risk adjusted bond excess returns. The individual bond return is adjusted for risk using the Lehman Brothers high-yield bond index. To avoid data biases outlined by Warga and Welch (1993), the monthly bond prices do not include "matrix" prices and are from the Moody's Bond Record. All multiple bond issues are considered. For stocks, the announcement period is defined as days 1, 0, and +1 while for bonds the announcement month is month 0. Returns are reported for 62 stocks and 53 bonds with available data and are in percent. with simultaneous Chapter 11 and DIP announcements are excluded from the analysis. Panel A: Standardized Cumulative Abnormal Returns (SCAR) Trading Days Standardized Cumulative Z Statistic Excess Returns (SCAR) [-1,0,+1] We conduct a series of checks for robustness tests. We estimate excess returns using the traditional market model, and market adjusted returns. Additionally, we re-estimated the models using equally- and valueweighted index. We also used median excess returns. The results are very robust to the change of model, procedures, estimation periods, index choices, and measurement of excess returns. Panel B: Monthly bond excess returns Month Excess return z-statistic
7 22 Table 3 Structure of DIP loans This table presents the structure of DIP loans during the period Maturity, type of DIP facility, restrictions on use of proceeds, and collateral for the loan are provided. The data are from the SDC syndicated loans database. Data on borrowing base is available for only 21 firms from court documents, credit agreements, internal documents, and reorganization plans. Structure of DIP Loans Number of firms Maturity One year or less 38 (35%) Between 1 and 2 years 47 (43%) Over 2 years 24 (22%) 109 Type of DIP Facility Revolving line of credit for less than one year 24 (25%) Revolving line of credit for over a year 59 (60%) Loan (term, demand, bridge) 7 (7%) Others (limited line, stand by letter) 8 (8%) 98 Number of DIP facilities with revolving line of credit and/or term loan 25 (25%) Restrictions on use of proceeds Working capital 29 (63%) General corporate purposes 10 (22%) Allowed operating expenses 6 (13%) Real estate loan 1 (2%) 46 Borrowing base Inventory 8 (38%) Inventory and accounts receivable 11 (52%) Cash or other assets 2 (10%) 21
8 23 Table 4 Covenants in DIP loans a This table presents the distribution of covenants for 20 DIP loans with available data from court documents. For comparison, covenants of junk bonds and bank loans taken from table 3 (Panel B) of Gilson and Warner (1997) are also presented. Frequency in Percent Type of covenants DIP Loans Junk Bonds Bank loans Affirmative covenants Financial reporting and disclosure b Payment of insurance, obligations, and taxes, and compliance with other laws Negative covenants Operating activities Capital expenditures Disposition of assets Financing activities Specific financial ratios that trigger defaults Cash payouts Preservation of lender s collateral and/or seniority Changes in management, control, and ownership Parent-subsidiary transactions a Information obtained from 10 DIP court motions, 6 credit agreements, and 4 reorganization plans. Information on affirmative covenants is only available on the credit agreements or DIP court motions. b Includes annual, monthly, and weekly reports; consultants and bankers reports; business plans; court motions, applications, and financial information filed in Chapter 11; reports to committees, shareholders, creditors, and financial community; audits; projections; notice of default, changes in the environment, or material adverse changes; and Uniform Commercial Code search results. Other conditions include permission for professionals to examine and inspect books, verify material reported, and to conduct physical inventory.
Debtor-in-possession financingand bankruptcy resolution: Empirical evidence $
Journal of Financial Economics 69 (2003) 259 280 Debtor-in-possession financingand bankruptcy resolution: Empirical evidence $ Sandeep Dahiya a, Kose John b, *, Manju Puri c, Gabriel Ram!ırez d a McDonough
More informationThe Choice Among Traditional Chapter 11, Prepackaged Bankruptcy, and Out-of-Court Restructuring
The Choice Among Traditional Chapter 11, Prepackaged Bankruptcy, and Out-of-Court Restructuring Keven Yost School of Business University of Wisconsin Madison Krannert Graduate School of Management Purdue
More informationRevolving Asset-Based Lending Contracts and the Resolution of Debt-Related Agency Problems
Revolving Asset-Based Lending Contracts and the Resolution of Debt-Related Agency Problems Richard L. Constand Jerome S. Osteryoung Donald A. Nast Small firms that do not have access to organized financial
More informationJournal of Financial and Strategic Decisions Volume 13 Number 2 Summer 2000 ACCOUNTS RECEIVABLE, TRADE DEBT AND REORGANIZATION
Journal of Financial and Strategic Decisions Volume 13 Number 2 Summer 2000 ACCOUNTS RECEIVABLE, TRADE DEBT AND REORGANIZATION James W. Tucker * and William T. Moore ** Abstract The optimal outcome of
More informationThe Determinants and the Value of Cash Holdings: Evidence. from French firms
The Determinants and the Value of Cash Holdings: Evidence from French firms Khaoula SADDOUR Cahier de recherche n 2006-6 Abstract: This paper investigates the determinants of the cash holdings of French
More informationChapter 14. Understanding Financial Contracts. Learning Objectives. Introduction
Chapter 14 Understanding Financial Contracts Learning Objectives Differentiate among the different mechanisms of external financing of firms Explain why mechanisms of external financing depend upon firm
More informationThe Impact of Receiving Debtor-in- Possession Financing on the Probability of Successful Emergence and Time Spent Under Chapter 11 Bankruptcy
Journal of Business Finance & Accounting, 28(7) & (8), Sept./Oct. 2001, 0306-686X The Impact of Receiving Debtor-in- Possession Financing on the Probability of Successful Emergence and Time Spent Under
More informationCapital Structure and Ownership Structure: A Review of Literature
[The Journal of Online Education, New York, January 2009] Capital Structure and Ownership Structure: A Review of Literature by BOODHOO Roshan ASc Finance, BBA (Hons) Finance, BSc (Hons) Banking & International
More informationHow To Understand The Financial Philosophy Of A Firm
1. is concerned with the acquisition, financing, and management of assets with some overall goal in mind. A. Financial management B. Profit maximization C. Agency theory D. Social responsibility 2. Jensen
More informationChapter 7: Capital Structure: An Overview of the Financing Decision
Chapter 7: Capital Structure: An Overview of the Financing Decision 1. Income bonds are similar to preferred stock in several ways. Payment of interest on income bonds depends on the availability of sufficient
More informationCHICAGO/#891704.5 DEBTOR IN POSSESSION FINANCING
DEBTOR IN POSSESSION FINANCING I. PREAMBLE Every industry has its slogans; debtor in possession financing (commonly referred to as DIP Financing) is no different. The First Lesson, Your first loss is your
More informationCHAPTER 16. Financial Distress, Managerial Incentives, and Information. Chapter Synopsis
CHAPTER 16 Financial Distress, Managerial Incentives, and Information Chapter Synopsis In the previous two chapters it was shown that, in an otherwise perfect capital market in which firms pay taxes, the
More information1 Overview 1.01 INTRODUCTION
1 Overview 1.01 INTRODUCTION 1.01(a) Scope Of This Work This treatise is a practical guide for secured creditors, i.e. creditors with collateral securing their claims against debtors, in the restructuring,
More informationRestructuring Overview: Chapter 11. Renée M. Dailey June 28, 2013
Restructuring Overview: Chapter 11 Renée M. Dailey June 28, 2013 What is Chapter 11? A chapter contained in title 11 of the United States Code (the "Bankruptcy Code") which provides for the reorganization,
More informationChapter 1 The Scope of Corporate Finance
Chapter 1 The Scope of Corporate Finance MULTIPLE CHOICE 1. One of the tasks for financial managers when identifying projects that increase firm value is to identify those projects where a. marginal benefits
More information30-1. CHAPTER 30 Financial Distress. Multiple Choice Questions: I. DEFINITIONS
CHAPTER 30 Financial Distress Multiple Choice Questions: I. DEFINITIONS FINANCIAL DISTRESS c 1. Financial distress can be best described by which of the following situations in which the firm is forced
More informationNon-traded financial contracts
11-1 Introduction Financial contracts are made between lenders and borrowers Non-traded financial contracts are tailor-made to fit the characteristics of the borrower In business financing, the differences
More informationAthens University of Economics and Business
Athens University of Economics and Business MSc in International Shipping, Finance and Management Corporate Finance George Leledakis An Overview of Corporate Financing Topics Covered Corporate Structure
More informationSimilarity in Bond Covenants*
Similarity in Bond Covenants* Gus De Franco Rotman School of Management, University of Toronto 105 St. George Street, Toronto, M5S 3E6, Canada gus.defranco@rotman.utoronto.ca Florin P. Vasvari London Business
More informationUNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF TEXAS HOUSTON DIVISION
UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF TEXAS HOUSTON DIVISION In re: Jointly Administered Case No. 01-42530-H4-11 Metals USA, Inc., et al., Case Nos. 01-42530-H4-11 through 01-42574-H4-11
More informationThe Depository Trust Company
The Depository Trust Company Unaudited Condensed Consolidated Financial Statements as of March 31, 2016 and December 31, 2015 and for the three months ended March 31, 2016 and 2015 THE DEPOSITORY TRUST
More informationWHAT IS BUSINESS CREDIT?
1 WHAT IS BUSINESS CREDIT? Why Do I Need Credit? Establishing a good credit rating is an important financial priority for every business. Having good business credit means that owners of businesses can
More informationTop 15 Bankruptcies 1980 - Present
Bankruptcy Top 15 Bankruptcies 1980 - Present Company Bankruptcy Date Total Pre-Bankruptcy Assets Filing Court District Worldcom, Inc. 7/21/2002 $103,914,000,000 NY-S Enron Corp.* 12/2/2001 $63,392,000,000
More informationTHE BASICS OF CHAPTER 11 BANKRUPTCY
THE BASICS OF CHAPTER 11 BANKRUPTCY Bankruptcy is a legal proceeding in which a debtor declares an inability to pay consumer or business debts as they become due. Debtors may seek to be excused from continuing
More informationThe Equity Performance of Firms Emerging from Bankruptcy (forthcoming in Journal of Finance)
The Equity Performance of Firms Emerging from Bankruptcy (forthcoming in Journal of Finance) by Allan C. Eberhart* The McDonough School of Business Georgetown University Washington, D.C. 20057 (202) 687-3784
More informationAn Alternative Way to Diversify an Income Strategy
Senior Secured Loans An Alternative Way to Diversify an Income Strategy Alternative Thinking Series There is no shortage of uncertainty and risk facing today s investor. From high unemployment and depressed
More informationCapital Market Access and Corporate Loan Structure. Kenneth Khang. Idaho State University. Tao-Hsien Dolly King
Capital Market Access and Corporate Loan Structure Kenneth Khang Idaho State University Tao-Hsien Dolly King University of North Carolina - Charlotte Current version: September 2010 We thank Steven Byers
More informationABI Commission Report Recommendations on DIP Financing Would Eliminate Lender Protection
Alert ABI Commission Report Recommendations on DIP Financing Would Eliminate Lender Protection December 30, 2014 The American Bankruptcy Institute Commission to Study the Reform of Chapter 11 (the Commission
More informationSmall Business Finance Thinking Strategically
Small Business Finance Thinking Strategically Copyright 2007 by AbdulJaami, PLLC. All Rights Reserved. This publication is intended as a general guide only. It does not contain a general legal analysis
More informationFinancing alternatives: You ve got options. Pick the right ones.
Junior Private equity Alternative Financing alternatives: You ve got options. Pick the right ones. Another step on the Grant Thornton Road to Recovery Companies need access to capital as they take their
More informationDistressed Debt Restructuring in the Presence of Credit Default Swaps
MASCIA BEDENDO LARA CATHCART LINA EL-JAHEL Distressed Debt Restructuring in the Presence of Credit Default Swaps The availability of credit insurance via credit default swaps has been closely associated
More informationHow To Calculate Financial Leverage Ratio
What Do Short-Term Liquidity Ratios Measure? What Is Working Capital? HOCK international - 2004 1 HOCK international - 2004 2 How Is the Current Ratio Calculated? How Is the Quick Ratio Calculated? HOCK
More informationBondholder Reactions to Bank Loan Covenant Violations and the Evolution of Bank Loan Covenants
Bondholder Reactions to Bank Loan Covenant Violations and the Evolution of Bank Loan Covenants Che-Wei Chiu Winona State University Department of Accounting School of Business Winona, MN 55957 cchiu@winona.edu
More informationInvesting in Bonds - An Introduction
Investing in Bonds - An Introduction By: Scott A. Bishop, CPA, CFP, and Director of Financial Planning What are bonds? Bonds, sometimes called debt instruments or fixed-income securities, are essentially
More informationUnderstanding Bank Loan Covenants:
Understanding Bank Loan Covenants: What You Need to Know Before You Sign This white paper, produced in collaboration with the Small Business Finance Institute, is the first in a series of educational articles
More informationIntroduction. 15.511 Corporate Accounting Summer 2004. Professor SP Kothari Sloan School of Management Massachusetts Institute of Technology
Introduction 15.511 Corporate Accounting Summer 2004 Professor SP Kothari Sloan School of Management Massachusetts Institute of Technology June 7, 2004 1 Session 1: Agenda Administrative matters Discussion
More informationEconomic Factors Affecting Small Business Lending and Loan Guarantees
Order Code RL34400 Economic Factors Affecting Small Business Lending and Loan Guarantees February 28, 2008 N. Eric Weiss Analyst in Financial Economics Government & Finance Division Economic Factors Affecting
More informationUse this section to learn more about business loans and specific financial products that might be right for your company.
Types of Financing Use this section to learn more about business loans and specific financial products that might be right for your company. Revolving Line Of Credit Revolving lines of credit are the most
More informationThe information content of bankruptcy filing on securityholders of the bankrupt firm: An empirical investigation
ELSEVIER Journal of Banking & Finance 19 (1995) 903-919 Journalof BANKING & FINANCE The information content of bankruptcy filing on securityholders of the bankrupt firm: An empirical investigation Sudip
More informationDeterminants of Capital Structure in Developing Countries
Determinants of Capital Structure in Developing Countries Tugba Bas*, Gulnur Muradoglu** and Kate Phylaktis*** 1 Second draft: October 28, 2009 Abstract This study examines the determinants of capital
More informationDiscussion of Franks-Sussman and Xu Bankruptcy Papers. Franklin Allen
Discussion of Franks-Sussman and Xu Bankruptcy Papers Franklin Allen Comparative Corporate Governance: Changing Profiles of National Diversity January 8-9, 2003 Tokyo, Japan Aim of bankruptcy law Efficient
More informationBank debt vs corporate bond choice and its effect on company value: Evidence from bank debt refinancing in the Nordic countries
Stockholm School of Economics Department of Finance Spring 2013 Bank debt vs corporate bond choice and its effect on company value: Evidence from bank debt refinancing in the Nordic countries Ivo Ailis
More informationDo Banks Price Owner Manager Agency Costs? An Examination of Small Business Borrowing*
Journal of Small Business Management 2002 40(4), pp. 273 286 Do Banks Price Owner Manager Agency Costs? An Examination of Small Business Borrowing* by James C. Brau Ang, Cole, and Lin (2000) provide evidence
More informationIn- and Out-of-Court Debt Restructuring in the Presence of Credit Default Swaps
In- and Out-of-Court Debt Restructuring in the Presence of Credit Default Swaps Mascia Bedendo Universita Bocconi Lara Cathcart Imperial College Business School Lina El-Jahel Imperial College Business
More informationMaturity and Corporate Loan Pricing
The Financial Review 39 (2004) 55--77 Maturity and Corporate Loan Pricing Aron A. Gottesman Lubin School of Business, Pace University Gordon S. Roberts Schulich School of Business, York University Abstract
More informationFLOATING RATE BANK LOANS: A BREAK FROM TRADITION FOR INCOME-SEEKING INVESTORS
FLOATING RATE BANK LOANS: A BREAK FROM TRADITION FOR INCOME-SEEKING INVESTORS With about $713 billion in assets, the bank loan market is roughly half the size of the high yield market. However, demand
More informationFLOATING RATE BANK LOANS: A BREAK FROM TRADITION FOR INCOME-SEEKING INVESTORS. Why does the bank loan sector remain so attractive?
FLOATING RATE BANK LOANS: A BREAK FROM TRADITION FOR INCOME-SEEKING INVESTORS Bank loans present a compelling income opportunity and a portfolio diversifier that provides protection against traditional
More informationFinancial Distress EC 1745. Borja Larrain
Financial Distress EC 1745 Borja Larrain Today: 1. Costs of financial distress. 2. Trade-off theory of capital structure. 3. Empirical estimates of the costs of financial distress. 4. Bankruptcy. Readings:
More informationEFRAG Short Discussion Series THE USE OF INFORMATION BY CAPITAL PROVIDERS IMPLICATIONS FOR STANDARD SETTING
EFRAG Short Discussion Series THE USE OF INFORMATION BY CAPITAL PROVIDERS IMPLICATIONS FOR STANDARD SETTING JAN 2014 This document has been published by EFRAG to assist constituents in developing their
More informationDEBTWIRE BROADCAST: PARAGON OFFSHORE VALUATION STRETCH RAISES FEASIBILITY CONCERN
DEBTWIRE BROADCAST: PARAGON OFFSHORE VALUATION STRETCH RAISES FEASIBILITY CONCERN Debtwire s team of journalists and analysts will recap Paragon s first-day hearing and explore the restructuring plan s
More information9. Short-Term Liquidity Analysis. Operating Cash Conversion Cycle
9. Short-Term Liquidity Analysis. Operating Cash Conversion Cycle 9.1 Current Assets and 9.1.1 Cash A firm should maintain as little cash as possible, because cash is a nonproductive asset. It earns no
More informationBonds - Bond Offerings and Reputation
Buyout Groups Reputational Concerns and Costs of Debt Financing: Evidence from Bond Offerings by IPO Firms Rongbing Huang, Jay R. Ritter, and Donghang Zhang * May 31, 2012 Abstract A popular view is that
More informationRefinancing Risk, Managerial Risk Shifting, and Debt Covenants: An Empirical Analysis
Refinancing Risk, Managerial Risk Shifting, and Debt Covenants: An Empirical Analysis Bo Li Queen s University First Draft: January 2012 November 2, 2012 Abstract This paper identifies a special channel
More informationSmall Business Borrowing and the Owner Manager Agency Costs: Evidence on Finnish Data. Jyrki Niskanen Mervi Niskanen 10.11.2005
Small Business Borrowing and the Owner Manager Agency Costs: Evidence on Finnish Data Jyrki Niskanen Mervi Niskanen 10.11.2005 Abstract. This study investigates the impact that managerial ownership has
More informationBANKERS GUIDE TO SECURE LENDING
BANKERS GUIDE TO SECURE LENDING WAREHOUSE RECEIPTS, ORDER OR STRAIGHT BILLS OF LADING, OTHER NEGOTIABLE AND NON-NEGOTIABLE DOCUMENTS OF TITLE, INCLUDING WAREHOUSE AND BAILEE OR DOCK RECEIPTS Lending Rationale
More informationDebt Refinancing Under the 7(a) Program. Lynn G. Ozer Executive Vice President Government Guaranteed Lending
Debt Refinancing Under the 7(a) Program Lynn G. Ozer Executive Vice President Government Guaranteed Lending Debt Refinancing SBA-guaranteed loan proceeds may not be used to refinance debt originally used
More informationQ3 2015 Investor Presentation
Firm Capital Mortgage Investment Corporation Firm Capital Mortgage Investment Corporation is a non-bank lender providing residential and commercial real estate financing. Q3 2015 Investor Presentation
More informationCurrent liabilities - Obligations that are due within one year. Obligations due beyond that period of time are classified as long-term liabilities.
Accounting Fundamentals Lesson 8 8.0 Liabilities Current liabilities - Obligations that are due within one year. Obligations due beyond that period of time are classified as long-term liabilities. Current
More informationCopyright 2009 Pearson Education Canada
The consequence of failing to adjust the discount rate for the risk implicit in projects is that the firm will accept high-risk projects, which usually have higher IRR due to their high-risk nature, and
More informationThe Corporate Finance Shift to Asset- Based Loans PART I
The Corporate Finance Shift to Asset- Based Loans PART I Realistic Business Owners Look Beyond Bank Cash Flow Loans 1 Brian Ballo Corporate Finance Associates The Good News 1 Financing is currently available
More informationSlide 2. What is Investing?
Slide 1 Investments Investment choices can be overwhelming if you don t do your homework. There s the potential for significant gain, but also the potential for significant loss. In this module, you ll
More informationA guide to investing in hybrid securities
A guide to investing in hybrid securities Before you make an investment decision, it is important to review your financial situation, investment objectives, risk tolerance, time horizon, diversification
More informationFIN 423/523 Recapitalizations
FIN 423/523 Recapitalizations Debt-for-Equity Swaps Equity-for-Debt Swaps Calls of Convertible Securities to Force Conversion optimal conversion policy Asymmetric Information What Is a Recapitalization
More informationUSAID-Funded Economic Governance II Project Credit Risk Workshop - Intermediate March 2006. The Credit Process. Funded by: 2006 BearingPoint, Inc.
USAID-Funded Economic Governance II Project Credit Risk Workshop - Intermediate March 2006 The Credit Process Funded by: 2006 BearingPoint, Inc. Table of Contents MODULE 2: THE CREDIT PROCESS OVERVIEW...1
More informationCost of Capital, Valuation and Strategic Financial Decision Making
Cost of Capital, Valuation and Strategic Financial Decision Making By Dr. Valerio Poti, - Examiner in Professional 2 Stage Strategic Corporate Finance The financial crisis that hit financial markets in
More informationIN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE "#$%&'!#(!(%)%"*!#(!+',$#-!%"!!.#//'//%#"!(%"0"&%"*!/1"+%&0$%#"!.-#&'+2-'/!
!aaassseee 111555- - -111000555000333- - -MMMFFFWWW DDDoooccc 888111 FFFiiillleeeddd 000333///111333///111555 PPPaaagggeee 111 ooofff 777 IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE
More informationCommon Stock. Corporate securities. Basic definitions
Common Stock Investing in common stock Dividends and capital gains Stodgy and safe vs. fledgling and risky Corporate securities Corporations raise money or capital from investors like you and me by issuing
More informationGENERAL INFORMATION AND Q&A
GENERAL INFORMATION AND Q&A 1. General Information Regarding Chapter 11 What is chapter 11? Chapter 11 is the section of the United States Bankruptcy Code that regulates corporate reorganizations. A chapter
More informationCatalyst/Princeton Floating Rate Income Fund Class A: CFRAX Class C: CFRCX Class I: CFRIX SUMMARY PROSPECTUS NOVEMBER 1, 2015
Catalyst/Princeton Floating Rate Income Fund Class A: CFRAX Class C: CFRCX Class I: CFRIX SUMMARY PROSPECTUS NOVEMBER 1, 2015 Before you invest, you may want to review the Fund s complete prospectus, which
More informationNUVISTA ENERGY LTD. Consolidated Statements of Financial Position (unaudited)
NUVISTA ENERGY LTD. Consolidated Statements of Financial Position (unaudited) ($Cdn thousands) Assets Current assets Cash and cash equivalents $ - $ - Accounts receivable and prepaids 42,980 30,317 Assets
More informationFEDERAL HOUSING FINANCE AGENCY
FEDERAL HOUSING FINANCE AGENCY ADVISORY BULLETIN AB 2012-02 FRAMEWORK FOR ADVERSELY CLASSIFYING LOANS, OTHER REAL ESTATE OWNED, AND OTHER ASSETS AND LISTING ASSETS FOR SPECIAL MENTION Introduction This
More informationEnergy Future Holdings Corp. (Exact name of registrant as specified in its charter) Energy Future Intermediate Holding Company LLC
UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 8-K Current Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (date of earliest event
More informationA leveraged. The Case for Leveraged Loans. Introduction - What is a Leveraged Loan?
PENN Capital Management The Navy Yard Corporate Center 3 Crescent Drive, Suite 400 Philadelphia, PA 19112 Phone: 215-302-1501 www.penncapital.com For more information: Christian Noyes, Senior Managing
More informationBANKRUPTCY AND THE RESOLUTION OF FINANCIAL DISTRESS*
Chapter 14 BANKRUPTCY AND THE RESOLUTION OF FINANCIAL DISTRESS* EDITH S. HOTCHKISS Boston College KOSE JOHN New York University ROBERT M. MOORADIAN Northeastern University KARIN S. THORBURN Dartmouth College
More informationRisk Factors Relating to NWR s Debt
Risk Factors Relating to NWR s Debt The following is a brief summary of certain risks related to the 7.375% Senior Notes of NWR due 2015 (the 2015 Notes ) and the 7.875% Senior Secured Notes of NWR due
More informationKey Employee Retention Plans in Bankruptcy
Key Employee Retention Plans in Bankruptcy Claire Crutchley College of Business Auburn University 303 Lowder Business Building Auburn, Alabama 36849 (334) 844-3002 crutccl@auburn.edu Keven Yost College
More informationHow credit analysts view and use the financial statements
How credit analysts view and use the financial statements Introduction Traditionally it is viewed that equity investment is high risk and bond investment low risk. Bondholders look at companies for creditworthiness,
More informationThe Financial Crises of the 21st Century
The Financial Crises of the 21st Century Workshop of the Austrian Research Association (Österreichische Forschungsgemeinschaft) 18. - 19. 10. 2012 Towards a Unified European Banking Market Univ.Prof. Dr.
More informationFinding the Right Financing Mix: The Capital Structure Decision. Aswath Damodaran 1
Finding the Right Financing Mix: The Capital Structure Decision Aswath Damodaran 1 First Principles Invest in projects that yield a return greater than the minimum acceptable hurdle rate. The hurdle rate
More informationAn Approach to Stress Testing the Canadian Mortgage Portfolio
Financial System Review December 2007 An Approach to Stress Testing the Canadian Mortgage Portfolio Moez Souissi I n Canada, residential mortgage loans account for close to 47 per cent of the total loan
More informationBond Prices at Default and at Emergence from Bankruptcy for US Corporate Issuers
Special Comment June 2005 Contact Phone New York Praveen Varma 1.212.553.1653 Richard Cantor Bond Prices at Default and at Emergence from Bankruptcy for US Corporate Issuers Summary This Special Comment
More informationChapter 6 Interest rates and Bond Valuation. 2012 Pearson Prentice Hall. All rights reserved. 4-1
Chapter 6 Interest rates and Bond Valuation 2012 Pearson Prentice Hall. All rights reserved. 4-1 Interest Rates and Required Returns: Interest Rate Fundamentals The interest rate is usually applied to
More informationThe recent Asset quality review on non-performing loans conducted by the Bank of Italy: Main features and results
The recent Asset quality review on non-performing loans conducted by the Bank of Italy: Main features and results 1. Introduction In the last few years the Italian economy has been under considerable strain.
More informationAccounts payable Money which you owe to an individual or business for goods or services that have been received but not yet paid for.
A Account A record of a business transaction. A contract arrangement, written or unwritten, to purchase and take delivery with payment to be made later as arranged. Accounts payable Money which you owe
More informationRising Default Rates Drive Growth in Debtor-in- Possession Lending. Larger Size and Broader Distribution Causing Greater Interest in Ratings for DIP s
www.moodys.com Special Comment Moody s Global Corporate Finance October 2008 Table of Contents: Overview 1 Rising Default Rates Drive Growth in Debtor-in- Possession Lending 2 Larger Size and Broader Distribution
More informationChapters 3 and 13 Financial Statement and Cash Flow Analysis
Chapters 3 and 13 Financial Statement and Cash Flow Analysis Balance Sheet Assets Cash Inventory Accounts Receivable Property Plant Equipment Total Assets Liabilities and Shareholder s Equity Accounts
More informationBusiness 2019 Finance I Lakehead University. Midterm Exam
Business 2019 Finance I Lakehead University Midterm Exam Philippe Grégoire Fall 2002 Time allowed: 2 hours. Instructions: Calculators are permitted. One 8.5 11 inches crib sheet is allowed. Verify that
More informationAsian Economic and Financial Review THE CAPITAL INVESTMENT INCREASES AND STOCK RETURNS
Asian Economic and Financial Review journal homepage: http://www.aessweb.com/journals/5002 THE CAPITAL INVESTMENT INCREASES AND STOCK RETURNS Jung Fang Liu 1 --- Nicholas Rueilin Lee 2 * --- Yih-Bey Lin
More informationThe Relationship Between Debt Financing and Market Value of Company: Empirical Study of Listed Real Estate Company of China
Proceedings of the 7th International Conference on Innovation & Management 2043 The Relationship Between Debt Financing and Market Value of Company: Empirical Study of Listed Real Estate Company of China
More informationNUVISTA ENERGY LTD. Consolidated Statements of Financial Position (unaudited)
NUVISTA ENERGY LTD. Consolidated Statements of Financial Position (unaudited) ($Cdn thousands) Assets Current assets Cash and cash equivalents $ - $ - Accounts receivable and prepaids 35,443 30,317 Assets
More informationLeader Short-Term Bond Fund. Leader Total Return Fund
Leader Short-Term Bond Fund Institutional Shares: Investor Shares: Class A Shares: Class C Shares: LCCIX LCCMX LCAMX LCMCX Leader Total Return Fund Institutional Shares: Investor Shares: Class A Shares:
More informationBPEP Workshop Financing your Company (part 2) Corporate Structure and Managing Debt
BPEP Workshop Financing your Company (part 2) Corporate Structure and Managing Debt October 21, 2013 Scott D. Elliott Partner, Ropes & Gray scott.elliott@ropesgray.com 415-315-6379 Ryan A. Murr Partner,
More informationThe Debt-Equity Trade Off: The Capital Structure Decision
The Debt-Equity Trade Off: The Capital Structure Decision Aswath Damodaran Stern School of Business Aswath Damodaran 1 First Principles Invest in projects that yield a return greater than the minimum acceptable
More informationFederal Home Loan Bank of San Francisco Announces Second Quarter Operating Results
News Release Federal Home Loan Bank of San Francisco Announces Second Quarter Operating Results San Francisco, The Federal Home Loan Bank of San Francisco today announced that its net income for the second
More informationHow To Understand The Financial System
E. BUSINESS FINANCE 1. Sources of, and raising short-term finance 2. Sources of, and raising long-term finance 3. Internal sources of finance and dividend policy 4. Gearing and capital structure considerations
More informationValuation Effects of Debt and Equity Offerings. by Real Estate Investment Trusts (REITs)
Valuation Effects of Debt and Equity Offerings by Real Estate Investment Trusts (REITs) Jennifer Francis (Duke University) Thomas Lys (Northwestern University) Linda Vincent (Northwestern University) This
More informationBonds and preferred stock. Basic definitions. Preferred(?) stock. Investing in fixed income securities
Bonds and preferred stock Investing in fixed income securities Basic definitions Stock: share of ownership Stockholders are the owners of the firm Two types of stock: preferred and common Preferred stock:
More information3,000 3,000 2,910 2,910 3,000 3,000 2,940 2,940
1. David Company uses the gross method to record its credit purchases, and it uses the periodic inventory system. On July 21, 20D, the company purchased goods that had an invoice price of $ with terms
More information