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Sovereign Debt Workouts

Michael Chui and Prasanna Gai

in Private Sector Involvement and International Financial Crises: An Analytical Perspective

Explains how policymakers must trade the ex-post costs of creditor coordination failure, which can help discipline sovereign debtors, against the ex-ante costs of debtor moral hazard. The threat of a ... More

Explains how policymakers must trade the ex-post costs of creditor coordination failure, which can help discipline sovereign debtors, against the ex-ante costs of debtor moral hazard. The threat of a liquidity crisis—a creditor run—is shown to be a powerful, albeit blunt, disciplining force in international capital markets, and the chapter explores the circumstances under which official intervention by the IMF can substitute for this discipline. The efficacy of collective action clauses as a means of ameliorating creditor coordination problems is also given a formal treatment.Less

The Wrongful Trading Provisions

RIZWAAN JAMEEL MOKAL

in Corporate Insolvency Law: Theory and Application

This chapter considers the impact of insolvency on the obligations of the debtor's managers by examining the wrongful trading provisions in section 214 of the Insolvency Act 1986. It employs the ... More

This chapter considers the impact of insolvency on the obligations of the debtor's managers by examining the wrongful trading provisions in section 214 of the Insolvency Act 1986. It employs the tools of agency theory and the ACM to analyze the need for these provisions, their structure, role, and effect. It asks whether a scheme of fair co-operation about insolvency issues would include a section 214-type duty, and if so, why. The analysis reveals that the duty would not be equally relevant for all types of companies, and that the influence of the market for managerial labour ensures most section 214 actions are likely to be brought against directors of closely-held companies, and against shadow directors. The analysis utilizes the insight that section 214 plays a role similar to that of security itself. An important aim of the chapter is to challenge the Law and Economics proposition that to re-distribute the rights of parties in a corporate liquidation creates socially wasteful incentives. After arguing that section 214 is redistributive in the relevant manner, the incentives created by those provisions for the managers of both healthy and distressed companies are examined. It is suggested that these incentives are generally socially efficient. In the result, the provisions would be acceptable to all those affected by them, regarded as equals.Less

Administrative Receivership and the Floating Charge

RIZWAAN JAMEEL MOKAL

in Corporate Insolvency Law: Theory and Application

This chapter considers the twin institutions of the floating charge and administrative receivership. It explains the distinctive role played by the floating charge by examining the empirical context ... More

This chapter considers the twin institutions of the floating charge and administrative receivership. It explains the distinctive role played by the floating charge by examining the empirical context in which it operates and by comparing the recoveries made by different classes of creditor in corporate liquidation. The analysis suggests that whereas the fixed charge in included in debentures so as to provide its holder with priority, the floating charge is a residual management displacement device. Its dominant role is to ensure the integrity of the debtor's estate when the latter becomes distressed and its management is displaced in favour of a specialist distress-oriented manager. This is where administrative receivership (‘receivership’) comes in. Traditionally, the replacement of the distressed company's management has been brought about by the appointment of a receiver (formerly, a receiver and manager). However, the chapter harnesses theory and evidence in favour of the argument that receivership is significantly destructive of social value, and that it is unfair and oppressive. Its virtual abolition by the Enterprise Act 2002 is therefore welcomed. However, the substitution of receivership with administration also, it is argued, signals the end of the usefulness of the floating charge. The chapter concludes by sketching out a case for the abolition of this type of charge.Less

The Importance and Benefits of Teams

Howard M. Blonsky

in The Dropout Prevention Specialist Workbook: A How-To Guide for Building Skills and Competence in Education

This chapter explains the benefits of working as a team, what people like or don’t like about working on teams, and the importance of recognizing everyone’s contribution and perspective.