... issue decreases the probability of default. The choice of the conversion ratio needs to solve a trade-off: on the one hand, the higher the conversion ratio, the lower the probability of default ... basis. The remaining debt is a fraction (1 – α) of the initial debt. The gains of the remaining debt holders are (1 – α) of the gains of all the initial debt holders. Thus, the transfer by the ... and Kenichi Ueda The Economics of Bank Restructuring: Understanding the Options SPN/09/12June 5, 2009 24 Without a high subsidy, high-quality banks would opt out of the plan. Given...