Within an optimal contracting framework we analyse some important aspects of debt structure: the number of creditors a company borrows from; the allocation of security interests among creditors; and inter-creditor covenants that govern renegotiation of debt contracts. The key to our analysis is...

This paper describes a theory of how borrowers with private information about their future credit prospects choose seniority and maturity of bank loans and publicly issued bonds. The model implies that short-term bank loans will be senior to public long- term debt. With sufficient public debt,...