Renegotiation of corporate bond contracts : A study of the Norwegian market 2007-2010

Abstract

This study examines 176 renegotiations of Norwegian corporate bond contracts in the period 1/1/2007-3/31/2010. An especially high renegotiation activity is observed between the last quarter of 2008 and throughout 2009. Close to 2/3 of the renegotiations relate to an actual or an inevitable default situation. Extension of the maturity date and altering of covenants are the most commonly proposed changes, while equity issue and increased coupon represent the most common forms of compensation offered to bondholders. The bondholders in general act uniform in their voting towards the borrower proposals. However, indications are found that renegotiations initiated at a late stage of the bond lifetime receive fewer acceptances from the bondholders.