–Â Â Â Â Â Â Â Â Â The true costs of bankruptcy or financial distress are:
- The costs involved in pursuing the legal process of realigning the claims on the assets of the company from those specified in the original borrowing contract.
- The implicit and opportunity costs incurred in this effort relative to what would have happened had the company financed instead by equity capital.
–Â Â Â Â Â Â Â Â Â Unless there is some unique benefit to the issuance of a particular type of claim, there is no reason to think that one type of claim will be better than another.
44 Comments