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BEGIN:VEVENT
UID:613eeae282b7bf5556247dc6ab12c2e3
CATEGORIES:Seminars
CREATED:20180731T144903
SUMMARY:Denis Gromb - HEC Paris
DESCRIPTION;ENCODING=QUOTED-PRINTABLE:<p style="text-align: justify;"><strong><span style="font-size: 11pt; font-
 family: 'Calibri','sans-serif'; color: black;">Conflicting Priorities: A Th
 eory of Collateral and Covenants</span></strong><span style="font-size: 11p
 t; font-family: 'Calibri','sans-serif'; color: black;"> (joint with Jason D
 onaldson and Giorgia Piacentino )</span></p><p style="text-align: justify;"
 ><strong><span style="font-size: 11pt; font-family: 'Calibri','sans-serif';
 ">Abstract:</span></strong></p><p style="text-align: justify;"><span style=
 "font-size: 11pt; font-family: 'Calibri','sans-serif';">Debt secured by col
 lateral has absolute priority in the event of default - it is paid ahead of
  unsecured debt, even if unsecured debt is protected by negative pledge cov
 enants prohibiting new secured debt. We develop a model of how this priorit
 y rule leads to conflicts among creditors. But we find that it can be optim
 al: borrowers’ option to use collateral in violation of covenants allows fo
 r the dilution of existing debt, and hence prevents underinvestment, wherea
 s creditors’ option to accelerate debt following a covenant violation deter
 s dilution, and hence prevents over-investment. The optimal outcome is impl
 ementable via a mix of different types of debt, including secured and unsec
 ured debt with tight and loose covenants. The model explains some  stylized
  facts about debt structure, covenants, and their violations.</span></p><p>
  </p>
DTSTAMP:20260405T192541Z
DTSTART:20181008T163000Z
DTEND:20181008T180000Z
SEQUENCE:0
TRANSP:OPAQUE
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