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The Changing Face of Chapter 11 Bankruptcy: Insights from Recent Trends and Research

Author

Listed:
  • Edith Hotchkiss

    (Department of Finance, Wallace E. Carroll School of Management, Boston College, Chestnut Hill, Massachusetts, USA)

  • Karin S. Thorburn

    (NHH Norwegian School of Economics, Bergen, Norway)

  • Wei Wang

    (Stephen J.R. Smith School of Business, Queen's University, Kingston, Ontario, Canada)

Abstract

Several recent trends have reshaped the nature of bargaining in Chapter 11. These include increasingly complex prebankruptcy capital structures, decreasing time in Chapter 11 due to prepacks and prenegotiated plans, growing use of restructuring support agreements (RSAs) and sales of substantially all assets, an increased number of defaulting private equity–owned firms, and an increase in activity of specialized distressed debt investors. These trends have changed the balance of power in favor of senior secured lenders, who further shape the course of out-of-court negotiations. We examine evidence of the impact of these changes on important stakeholders, including creditors and workers.

Suggested Citation

  • Edith Hotchkiss & Karin S. Thorburn & Wei Wang, 2023. "The Changing Face of Chapter 11 Bankruptcy: Insights from Recent Trends and Research," Annual Review of Financial Economics, Annual Reviews, vol. 15(1), pages 351-367, November.
    • Handle: RePEc:anr:refeco:v:15:y:2023:p:351-367
    DOI: 10.1146/annurev-financial-100521-103241
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    More about this item

    Keywords

    bankruptcy; Chapter 11; defaults; distressed debt; recovery rate; 363 sales; private equity; creditor rights; leveraged loans;
    All these keywords.

    JEL classification:

    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law

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