The dynamics of bank debt renegotiation in Europe: A survival analysis approach

What is it about?

Empirical investigation of the determinants of debt contract renegotiation dynamics in Europe Complex initial loan contracts and renegotiations increase the duration between amendments Larger agent section of a syndicate and greater borrower-lender proximity slows down the renegotiation process Weak legal protection of creditors’ rights increases the probability of renegotiation Bank debt contracts are renegotiated more quickly during the Global Financial Crisis

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Why is it important?

Overall, empirical evidence from Europe shows that bank loans experience multiple renegotiation rounds, thus leading to substantial amendments to main loan terms. Frequently amended debt contracts exhibit very short durations between renegotiation rounds. Initial loan terms, banking pool features, amendment characteristics, and country legal environment have a significant impact on the renegotiation dynamic, while contract complexity, information frictions, uncertainty, and legislation play a major role in shaping bank loan contracts over time.