Getting to yes: the role of coercion in debt renegotiations

Abstract

This article develops a comprehensive account of the methods of consent solicitation broadly construed. We offer four principal contributions. First, we identify the features of a solicitation that can produce coercive intercreditor dynamics. Second, we document the possibility of coercive methods under standard bond and loan contracts. Third, we show that economic considerations can justify coercion. Fourth, we conclude that the most coercive prevailing techniques cannot be so easily justified and propose an approach to construing debt contracts that would restrain what are likely the most value-destructive solicitation methods without condemning longstanding and plausibly value-enhancing techniques.