European Parliament Library

Japan’s Distressed-Debt Market, Kazunari Ohashi, Manmohan Singh

Contributor
Abstract
Sizable risk capital from outside may be necessary to accelerate Japan's corporate restructuring to replace the stock of impaired bank loans. To attract risk capital, impaired loans must find market-clearing prices. However, the asymmetry in the bid-ask prices faced by banks and distressed-debt investors continues to stall efforts to create a liquid distressed-debt market. This paper asserts that the wedge between the prices faced by different participants is primarily a result of different valuation methods employed by banks and distressed-debt investors. On the one hand, banks do not recognize "maturity default" that results in banks rolling over impaired-loan accounts, effectively turning them into perpetual debt, which is expected to capture any upside potential for value. On the other hand, distressed-debt investors presently view their investments as equity stakes that require improved cash flows, unlike the buy-and-sell distressed-collateral market that existed in the mid-1990s. We suggest that bids from distressed-debt investors may not be as low as they are deemed by local banks and the asymmetry in prices may be reduced if banks value their claims as corporate equity
Table Of Contents
""Contents""; ""I. INTRODUCTION""; ""II. DEVELOPMENTS OF JAPAN�S DISTRESSED-DEBT MARKET""; ""III. FAILURE OF MAIN BANK SYSTEM""; ""IV. CAUSES OF PRICE MISMATCHES IN SUBPERFORMING LOAN MARKET""; ""V. POLICY SUGGESTIONS""; ""APPENDIX I""; ""APPENDIX II""; ""REFERENCES""
Language
eng
Literary Form
non fiction
Note
Description based upon print version of record
Physical Description
1 online resource (30 p.)
Specific Material Designation
remote
Form Of Item
online
Isbn
9781452781532

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