In finance, a holdout problem occurs when a bond issuer is in default or nears default, and launches an exchange offer in an attempt to restructure debt held by existing bond holders. Such exchange offers typically require the consent of holders of some minimum portion of the total outstanding debt, often in excess of 90%, because, unless the terms of the bond provide otherwise, non-consenting bondholders will retain their legal right to demand repayment of their bonds at par (the full face amount). Bondholders who withhold their consent and retain their right to seek the full repayment of original bonds, may disrupt the restructuring process, creating a situation known as the holdout problem.
The contractual terms for obligating all bondholders to accept a restructuring approved by some supermajority is typically spelled out in what are known as Collective Action Clauses, or CACs. In some jurisdictions, CACs or their equivalents are required under local law, but this is not a universal practice. CACs can represent additional borrowing costs for lenders while conversely, borrowers may seek lower debt costs without CAC protection but this exposes them to holdout conditions and potential damaging and expensive litigation which in the case of post-2001 Argentina essentially locked that country out of access to conventional international financing.
The "holdouts" gamble that the restructuring will take place despite the lack of their consent, potentially leading to full repayment of their bonds, while other bondholders receive reduced payments according to the terms of the restructuring. If the restructuring does not take place, they gain nothing, but holdouts may initiate damaging litigation that results in extremely high costs in direct and indirect economic injury to the debtor.
The claims of the holdouts may be insignificant enough, and bothersome enough, that the issuer may satisfy them in whole simply not to be bothered.
Where bondholders are widely dispersed, as is often the case, it can be difficult to contact many holders. Further, many holders of small amounts of bonds have little incentive to invest the time and energy in evaluating the terms of the exchange offer. These factors represent substantial difficulties in obtaining the minimum consent levels.
In finance, a holdoutproblem occurs when a bond issuer is in default or nears default, and launches an exchange offer in an attempt to restructure debt...
initial asking price Holdout (gambling), a device used to cheat in gambling Holdoutproblem, in finance concerning bond redemption Holdout weapon, a weapon...
Japanese holdouts (Japanese: 残留日本兵, romanized: Zanryū nipponhei, lit. 'remaining Japanese soldiers') were soldiers of the Imperial Japanese Army and Imperial...
through a New York corporation and governed by United States law. The holdout bondholders found themselves unable to seize Argentine sovereign assets...
property rights (so as to avoid the holdoutproblem), Coasean bargaining still fails, because of the free-rider problem. When the multiple parties on the...
to reduce the cost of debt reduction. Furthermore, it reduced the holdoutproblem in which certain holders have an incentive not to participate in the...
to the possibility of running into the assignment problem, the holdoutproblem, the free-rider problem, or transaction costs. Additionally, firms could...
assembly, where each parcel must be purchased separately (leading to a holdoutproblem), and eminent domain which is often quite controversial and only pays...
watercourses and thoroughfares. Straw man (law) Benson, Bruce L. (2006). "Do HoldoutProblems Justify Compulsory Right-of-Way Purchase". Street Smart: Competition...
reversing high levels of anti-americanism in the country and resolving the holdoutproblem with the vulture funds, among other key issues. Obama later congratulated...
emergence of holdout creditors who refuse the proposed restructuring, posing a problem to the reorganization process the holdoutproblem. Therefore, the...
reversing high levels of anti-Americanism in the country and resolving the holdoutproblem with the vulture funds, among other key issues. Obama later congratulated...
Bench, 130, accessed 8 September 2023 Benson, Bruce L. (2006). "Do HoldoutProblems Justify Compulsory Right-of-Way Purchase". Street Smart: Competition...
proven to run infinitely. Various sources list different numbers of these holdouts. Skelet lists 42 or 43 unproven machines. At the moment the record 6-state...
Moreover, Spectrum Exchange did not have a good solution to the holdoutproblem: the problem of an essential TV station holding out to capture the windfall...
Journal of Ayn Rand Studies, Vol. 14, No. 1, 2014, 55-74. "The Problem with the HoldoutProblem" with Edward J. Lopez. Review of Law & Economics, Vol. 9, No...
learning models can be validated by accuracy estimation techniques like the holdout method, which splits the data in a training and test set (conventionally...
Railways and Shipping Imperial Guard Imperial Way Faction (Kōdōha) Japanese holdout Taiwan Army of Japan Control Faction (Tōseiha) Kempeitai Imperial Japanese...
1913-12-23. p. 8. Retrieved 2011-03-07. "Coast league already has some "holdout" problems". Regina Leader. 1915-10-21. p. 21. Retrieved 2011-03-07. "Art Ross...
pivotal figure in baseball's labor movement when the two staged joint holdout and demanded a fairer contract from the Dodgers. He is also one of the...
game from rehab and cheers him on. Ted later convinces Beard, the only holdout against Nate's return, to let him return. Beard visits Nate and reveals...
taking advantage of their financial problems (often with some "persuasion" from J.W.'s henchmen). The one remaining holdout is Ella Connors (Jane Fonda), whose...
late holdout, joined Berne effective March 1, 1989, with the passage of the Berne Convention Implementation Act of 1988; China, another notable holdout, joined...
unsuccessfully, to get the holdout juror removed from the jury, arguing that juror was biased. After the result, the holdout juror reported that she received...
Massoud fled to neighboring Tajikistan. Despite these developments, NRF holdouts continued to fight, still waging a guerrilla campaign in several provinces...
Global Information