Aggressive 'vulture' creditors can actually be the thing that saves a dying company from totally going under.
March 24, 2026
Original Paper
Sophisticated Creditors and Distressed Firms: Saviors or Vultures?
SSRN · 6396198
The Takeaway
Sophisticated creditors are often seen as predators who 'hold up' restructurings to get a better deal for themselves. The model reveals a 'silver lining': their aggressive self-interest often blocks moves that would dissipate the firm's value, effectively preventing costly bankruptcies that would have happened under more 'cooperative' creditors.
From the abstract
Whether a distressed firm benefits from the expertise of a sophisticated creditor (SC) or is hurt by its efforts to hold up other claimants is being debated. We model both aspects of SC participation in restructurings. Our model shows that the hold up efforts do not prevent firms from leveraging SC expertise when doing so can raise firm value. Moreover, a SC's presence can be valuable even when it lacks the expertise to directly raise firm value because its attempts at hold up have a silver lini