Empty creditors — bondholders hedged with Credit Default Swaps (CDSs) — face incentives to holdout from “Distressed Exchanges” (DEs) of debt because the CDS hedge alters their payoffs to favor bankruptcy. We show using detailed data on DEs that firms respond to this holdout problem by...

In this paper we focus on the concern that a preference for quick sales over traditional reorganization cases - which we see in both the United States and Canada - might allow the debtor's management to work with secured lenders to extract assets from the debtor in a way that would not be...