Vincent S.J. Buccola

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Volume 90.1
Sponsor Control: A New Paradigm for Corporate Reorganization
Vincent S.J. Buccola
Associate Professor, The Wharton School of the University of Pennsylvania.

For their helpful comments on previous drafts, I thank Alex Aleszczyk, Ken Ayotte, Douglas Baird, Ralph Brubaker, Allison Buccola, Jared Ellias, Josh Feltman, Elisabeth de Fontenay, Michael Francus, Chris Hampson, Sujeet Indap, Adam Levitin, Lynn LoPucki, Stephen Lubben, Michael Ohlrogge, Billy Organek, Samir Parikh, Sarah Paterson, John Pottow, Bob Rasmussen, Harrison Shure, Mike Simkovic, David Skeel, Richard Squire, George Triantis, Kate Waldock, @HalCapLLC, and participants in the Corporate Restructuring and Insolvency Seminar and at workshops at Northwestern, the University of Southern California, and Wharton.

Bankruptcy scholars have long organized their field around a stylized story, a paradigm, of lender control. When lenders extend credit, the story goes, they insist on the borrower agreeing to strict covenants and granting blanket liens on its assets; then, if the borrower later encounters financial distress, they use their bargained-for rights as prods to steer the company toward a resolution favorable to themselves, whether or not that resolution is value maximizing for the investors as a group. As fruitful as the lender-control heuristic has been, however, it no longer corresponds to reality.

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87.8
The Myth of Creditor Sabotage
Vincent S.J. Buccola
Assistant Professor, The Wharton School of the University of Pennsylvania.

This Article was substantially written while Mah and Zhang were undergraduates, and it reflects neither the opinions of nor nonpublic information about their employers. The authors thank Ken Ayotte, Allison Buccola, Saul Levmore, Josh Macey, Adriana Robertson, Mike Simkovic, David Skeel, Matt Turk, and participants at a Wharton faculty workshop for criticism of defunct drafts.

Jameson K. Mah
Investment Analyst, Cyrus Capital Partners. BS (Economics), The Wharton School of the University of Pennsylvania.
Tai Zhang
Analyst. BS (Economics), The Wharton School of the University of Pennsylvania.

A basic assumption in the standard paradigm of corporate finance is that a company’s investors want the company to succeed. To be sure, investors of different classes—stockholders and bondholders, for example—bear risk and reward unequally.

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86.4
The Logic and Limits of Municipal Bankruptcy Law
Vincent S.J. Buccola
Assistant Professor, The Wharton School of the University of Pennsylvania.

Thanks to Douglas Baird, Allison Buccola, Steve Buccola, Laura Coordes, Brian Hathaway, Rich Hynes, Juliet Moringiello, Eric Rasmusen, David Schleicher, and David Skeel for extensive comments on earlier drafts; and to Joe Gyourko and Bob Inman for generative conversations. Thanks also to participants in workshops at Wharton and the Indiana University Kelley School of Business. Dorinda and Mark Winkelman provided valuable research support.

Cities and towns across the country face debt burdens of a magnitude not seen since the Great Depression. Four of the five largest municipal bankruptcies in history have been filed in the last decade, and more are bound to come.

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