The access to collateral in the event of default. This is related to the presence or absence of a bankruptcy code, which formalises access to collateral. The presence of any different creditors can severely hamper co-ordination in a reorganisation plan. The presence of a bank loan helps bondholders in the sense that the bank closely monitors the borrower. On the other hand, since bank loans are typically senior and secured, bondholders' access to collateral may be curtailed.
Debt can be a loan extended by a bank or a syndicate of banks.
It can also be in the form of bonds issued by the borrowers that are held by many investors across the globe. Credit markets in recent times have witnessed an explosive growth in bond markets. This growth has often come at the expense of loan markets in some areas such as corporate debt markets and sovereign debt markets. In November 1999 the Bank of England reported that the UK corporate borrowers used debt securities for 35 per cent of their borrowing needs in the 1998-99 period, whereas their reliance on bonds was under 20 per cent in 1990. Macroeconomic factors such as recession or a collapse in exchange rates may cause borrowers to default on loans.