International Evidence
Corporate Financial Distress, Restructuring, and Bankruptcy,
03/2019
Book Chapter
Insolvency laws vary considerably across countries, as do protections for creditors and enforceability of contracts outside of insolvency procedures. This chapter provides a brief descriptions of the ...key features of insolvency codes for a set of countries explored in the academic research ‐ France, Germany, Japan, Sweden, and the United Kingdom ‐ to demonstrate the varying degrees of creditor orientation. It describes the outcomes, costs and time in restructuring, and recovery rates. The chapter also summarizes the current framework in two economies with significant growth in the restructuring industry, China and India. It focuses on classifications based on the reorganization procedure. The Model Law provides a legal framework for cross‐border cooperation and communication between courts in different countries. Among other benefits of the Model Law, it is expected that the greater certainty in matters of creditor and debtor rights will assist international trade, commerce and the availability of capital in less‐developed countries.
This chapter states that the outlook for mezzanine is pretty good. A few elements have contributed to that, including the fact that since 2008 financial institutions are repositioning their loan ...portfolios, thereby often overweighting sovereign bonds over operational loans. Secondly, the financial repression pushed savvy investors in relatively risk‐elevated fixed‐income products as well as higher yielding sukuks (bond look‐alike Islamic products) like leveraged and high‐yield loans and bonds, as a direct alternative to equity allocations. Thirdly, many investors have re‐allocated future allocations to mezzanine, often providing similar returns compared to PE. Finally, the emerging equity gap in the world has led and will lead to mezzanine products being used as a direct alternative to replace equity products and senior debt alike. The chapter also talks about unitranche product, and insolvency laws in Europe.
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