Distressed equity offeringsby German corporations

For a sample of 267 financially distressed German corporations, I analyze firms'decision to recapitalize by raising fresh equity. I find evidence consistent with thehypothesis that wealth transfers from owners to creditor resulting from a costlydebt overhang present a potential impediment to a successful private restructuring.Firms with high leverage and low future growth potential have troubles to raise newfunds. However, offerings are frequently accompanied by generous debt-concessionsby lending banks, which suggests that firms are able to overcome a debt-overhangin private bargains.[...]