In case of multiple source lending even solvent firms may be forced into bankruptcy due to uncoordinated credit withdrawals of their lenders. This paper analyzes whether a debtor firm can thwart such inefficient liquidations by offering creditors the option to delay their foreclosure decision...

In case of multiple creditors a coordination problem can arise when the borrowingfirm runs into financial distress. Even if the project's value at maturity is enoughto pay all creditors in full, some creditors may be tempted to foreclose on theirloans. We develop a model of creditor coordination...