Abstract

This paper shows that when the bankruptcy code protects the creditors' rights with no impairments to secured creditors, issuance of debt such as repo with exemption from automatic stay adds no value. When the bankruptcy process admits violations of absolute priority rules or results in collateral impairments to secured creditors, the liability structure includes short-term debt, with safe harbor protection when the pledged collateral satisfies a minimum liquidity threshold. Safe harbor rights lead firms to issue more short-term debt, less long-term debt and increase the long-term spreads.

View research
Download PDF

Citation

Auh, Jun Kyung, and M. Suresh Sundaresan. "Repo Priority Right and the Bankruptcy Code." Critical Finance Review (forthcoming).

Each author name for a Columbia Business School faculty member is linked to a faculty research page, which lists additional publications by that faculty member.

Each topic is linked to an index of publications on that topic.