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Secured creditors, Finnish reorganizations, Secured debt priority, Secured creditor priority, Empirical legal studies


Applied Statistics | Business Organizations Law | Comparative and Foreign Law


Theory suggests that secured creditors may increasingly oppose a debtor’s reorganization as the value of their collateral approaches the amount of their claims. If reorganization occurs and the value of the firm appreciates, the secured creditor receives only part of the gain. But if the firm’s value depreciates, the secured creditor bears all of the cost. Secured claimants, thus, often have more to lose than to gain in reorganizations. This study of Finnish reorganizations filed in districts that account for most of the country’s reorganizations finds that creditor groups most likely to be well-secured are most likely to oppose reorganization. We also find a negative correlation between how well-secured banks and other institutional lenders are and the likelihood of a confirmed reorganization plan. Limiting the priority of secured debt might stimulate reorganizations.

Publication Citation

Clas Bergström et al., "Secured Debt and the Likelihood of Reorganization", 21 International Review of Law and Economics (2002)