AN INSTITUTIONAL INNOVATION TO REDUCE THE AGENCY COSTS OF PUBLIC CORPORATE BONDS
This paper proposes an institutional innovation in the structure of public bonds that is intended to provide some of the advantages of private loans- active monitoring, tight covenants, and ease of reorganization-while retaining the benefits of liquidity and ease of diversification provided by publicly traded securities. The authors propose that a publicly registered corporate bond provide for a "supertrustee" who will act on behalf of bondholders. The supertrustee will be charged with responsibility to monitor the compliance of the borrower with the terms of the bond covenants and given exclusive authority to negotiate amendments to the covenants and decide what action to take in the event of a breach of a covenant. 2000 Morgan Stanley.
Year of publication: |
2000
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Authors: | Amihud, Yakov ; Garbade, Kenneth ; Kahan, Marcel |
Published in: |
Journal of Applied Corporate Finance. - Morgan Stanley, ISSN 1078-1196. - Vol. 13.2000, 1, p. 114-121
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Publisher: |
Morgan Stanley |
Saved in:
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