This paper develops a new model of debt renegotiation in a structural framework, that accounts for both taxes and … coupon reduction to creditors, given that the new coupon is chosen such that debt value remains constant. Our result shows … firm without hurting the creditors. This model of debt renegotiation can be viewed as a way of passing from a junk bond to …

This paper develops a model with the novel feature that firms can renegotiate debt both in and outside distress. We … show that this feature is crucial for debt renegotiation models to explain corporate policies and debt prices. Specifically … debt control premiums, and predicts realistic renegotiation timing policies. Incorporating both renegotiation events also …

price them into the ex-ante credit spreads. Using a realistic dynamic bargaining model of reorganization, we show that the … off-equilibrium threat of costly renegotiation can lead to lower leverage, even with liquidation in equilibrium. If …