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ABI Endowment to Fund Study of Claims Trading Associated with Chapter 11 Bankruptcies

Contact: John Hartgen
             (703) 739-0800
            
jhartgen@abiworld.org

 

ABI ENDOWMENT TO FUND STUDY OF CLAIMS TRADING ASSOCIATED WITH CHAPTER 11 BANKRUPTCIES

August 30, 2007, Alexandria, Va. — The American Bankruptcy Institute Endowment Fund has awarded a $36,900 grant to an international research team examining claims trading in large chapter 11 cases. The researchers—Prof. David C. Smith of the McIntire School of Commerce at the University of Virginia, Prof. Per Strömberg of the Swedish Institute for Financial Research and the Stockholm School of Economics, and Tinamarie Feil of the BMC Group, Inc.—will document the extent to which the ownership of claims in large bankrupt firms changes hands, and will attempt to assess the impact that claims ownership has on the outcome of companies’ bankruptcy status.

“We are thrilled to have the opportunity to pursue research into this important and timely subject, and we are honored to be supported in our efforts by the ABI,” said Smith. “No study has yet documented the extent to which chapter 11-related claims trading occurs, or how it might ultimately affect the health of the bankrupt company.  It is fitting that the ABI, as the premier professional organization in the field of insolvency, will play a key role in shedding light on these matters.”

The researchers will investigate a number of fundamental issues associated with claims trading, seeking to identify the attributes that make certain firms more likely to experience high levels of such trading, and who the typical buyers and sellers are in claims trading transactions.  They will also examine whether the trading activities of distressed investors affect the likelihood of a successful reorganization and if the claims trading process leads to a redistribution of value among different claimants.

The primary source for the researchers will be the records maintained by information management companies that act as claims administrators in chapter 11 cases. These companies aid debtors in building and maintaining complete claimant lists, and help prepare a creditor matrix, assets and liabilities schedules, and other claimant-related information for their debtor client. The researchers will also use additional information on large borrower loan deals to obtain the identities of senior bank claimants and to gather information on the participants in DIP loans.

Prior to joining the University of Virginia’s McIntire School of Commerce, Prof. Smith worked as an economist in the International Finance Division of the Federal Reserve Board.  Prof. Strömberg is a senior research fellow at the Swedish Institute of Financial Research, as well as associate professor of Finance at the Stockholm School of Economics and adjunct associate professor of Finance at the University of Chicago Graduate School of Business. Feil is a co-founder and president of Legal Services at BMC Group, an information management company, and has more than 20 years’ experience directing various aspects of corporate compliance, communications and insolvency transactions.

The ABI Endowment Fund was created in 1989 to provide a secure financial base for the Institute and to provide resources for insolvency research and education. Projects eligible for Endowment funding include research by individuals or entities relating to bankruptcy or insolvency; surveys or other analytical investigation; the education of judges, court personnel, other governmental personnel and the general public; scholarships or other educational grants; support for the Robert M. Zinman Resident Scholar; and support for both the Chief Judge Conrad B. Duberstein National Bankruptcy Memorial Moot Court Competition and ABI’s Corporate Restructuring Competition. Since 1998, the Fund has awarded nearly $750,000 in grants.

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ABI is the largest multi-disciplinary, nonpartisan organization dedicated to research and education on matters related to insolvency. ABI was founded in 1982 to provide Congress and the public with unbiased analysis of bankruptcy issues. The ABI membership includes more than 11,500 attorneys, accountants, bankers, judges, professors, lenders, turnaround specialists and other bankruptcy professionals providing a forum for the exchange of ideas and information. For additional information on ABI, visit www.abiworld.org. For additional conference information, visit http://www.abiworld.org/conferences.html