Events Calendar

Rent extraction by super-priority lenders

Friday, March 15, 2019
1:30 pm - 2:30 pm
University Community Centre (UCC)
Room: 37
Rent extraction by super-priority lenders

Rent extraction by super-priority lenders

Friday, March 15,
UCC 37

Wei Wang
Associate Professor,
RBC Fellow of Finance
Smith School of Business, Queen’s University

We document large-sample evidence of rent extraction by suppliers of debtor-in-possession (DIP) loans to firms in Chapter 11 bankruptcy. DIP loans, which are fully collateralized with super-priority, have near-zero default risk and loss conditional on default. Moreover, they provide a valuable loan-to-own option and
often allow lenders to roll up their prepetition claims into the new loan. Nevertheless, DIP loan spreads exceed high-risk leveraged loan spreads by several hundred basis points.

Additionally, DIP lenders charge unusually high loan fees. We provide fresh new evidence on private lenders of last resort blocking competition and engaging in rent extraction---with court approval.

Wei Wang is an associate professor and RBC fellow of finance at Smith School of Business at Queen's University (Canada) and the founding director of Queen’s Master of Finance–Beijing program. His primary research expertise is in corporate restructuring, leveraged finance and high-yield bonds, distressed investing, and corporate governance. His research papers have been published in top finance journals such as Journal of Finance and Journal of Financial Economics, and featured in prominent media including the Wall Street Journal, Dow Jones Newswires, South China Morning Post, The Globe and Mail, and Business Week. He has published eight finance case package for Harvard Business School. These cases cover a wide range of corporate finance topics, including working capital management, short-term financing, capital structure, corporate valuation, payout policy, corporate restructuring, and merger& acquisitions, and have been adopted by many schools internationally. He has taught corporate restructuring and distress investing in the undergraduate, MBA, EMBA, and ExecEd programs at the Wharton School of University of Pennsylvania since 2015. He was a visiting associate professor at the Hong Kong University of Science and Technology Business School from 2015 to 2016.

Sponsored by:  DAN Department of Management and Organizational Studies and Social Science Student Council

DAN Manangement
DAN Department of Management & Organizational Studies
Event Type:

Powered by Blackbaud
nonprofit software