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The Design of Refinancing Contracts

Santiago Forte Arcos

出版	SSRN, 2002
URL	http://books.google.com.hk/books?id=ojXCzgEACAAJ&hl=&source=gbs_api

註釋

This paper introduces the concept of quot;refinancing contractquot;. Its design appears as an alternative to the classical assumption of new equity issued to finance the payment of corporate debt. Dividend rates, maturities, and nominal debt payments, are modeled as part of the contract. We also describe credit spreads and debt risk as a function of the firm characteristics, the risk free interest rate, and the specific contract selected. It is finally shown that the quot;lagged effectquot; of the riskfree interest rate on the credit spreads on corporate bonds found by Guha, Hiris and Visviki (2000), the positive autocorrelation in the change of credit quality documented by Altman and Kao (1992), and the range of firm values in which KMV Corporation (1999) finds typically to be the quot;default pointquot;, are all consistent with the refinancing assumption.