Problem
A company, now worth $95M, has a $120M face-value bond maturing soon, held in $20M blocks by six institutional investors. This means the company is facing bankruptcy (i.e., it owes more than what it is worth), which it wants to avoid because it would be worth only $60M in bankruptcy. Suppose the company makes a voluntary exchange offer: exchange your 1/6 claim on the existing bond for a 1/6 claim on a bond with face value $90M.
1. Show that everybody would win if the offer succeeded, but the offer won't succeed.
2. How could you modify the offer to increase the chance of success?