Dans le cadre du Séminaire de Recherche en Finance, Prof. Zsuzsanna Fluck, Michigan State University, donnera une conférence intitulée : The Defeasance of Control Rights
Organisé par :
We analyze one frequently used clause in public bonds called 'covenant defeasance'.
Defeasance allows the bond issuer to remove all of the bond's covenants by placing the remaining outstanding payments with a trustee in an escrow account. Bond covenants are predominantly negative (non-contingent) covenants. By giving the firm an option to remove covenants, non-contingent control rights can be made state-contingent even when no interim signals are available.
We provide a theoretical justification for defeasance and show empirically that defeasance allows for the inclusion of more covenants in bond issues.
We document that investors are willing to pay a premium of 28 basis points for defeasable bonds.
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