scholarly journals Sovereign Debt Restructurings

2021 ◽  
Vol 13 (2) ◽  
pp. 26-77
Author(s):  
Maximiliano Dvorkin ◽  
Juan M. Sánchez ◽  
Horacio Sapriza ◽  
Emircan Yurdagul
Keyword(s):  
Economic Theory ◽  
Discrete Choice ◽  
Sovereign Debt ◽  
Decision Rules ◽  
Dynamic Discrete Choice ◽  
Debt Restructuring ◽  
Book Value ◽  
Regulatory Costs ◽  
Debt Crises ◽  
Debt Dilution

Sovereign debt crises involve debt restructurings characterized by a mix of face value haircuts and maturity extensions. The prevalence of maturity extensions has been hard to reconcile with economic theory. We develop a model of endogenous debt restructuring that captures key facts of sovereign debt and restructuring episodes. While debt dilution pushes for negative maturity extensions, three factors are important in overcoming the effects of dilution and generating maturity extensions upon restructurings: income recovery after default, credit exclusion after restructuring, and regulatory costs of book value haircuts. We employ dynamic discrete choice methods that allow for smoother decision rules, rendering the problem tractable. (JEL E44, F34, F41, H63)

The Devil’s Haircut: Investor–State Disputes over Debt Restructuring

2018 ◽  
Vol 63 (8) ◽  
pp. 1889-1922 ◽  
Author(s):  
Matthew DiGiuseppe ◽  
Patrick E. Shea
Keyword(s):  
Sovereign Debt ◽  
Bargaining Power ◽  
Distributive Politics ◽  
Hurdle Model ◽  
Debt Restructuring ◽  
Double Hurdle Model ◽  
Globalized Economy ◽  
Debt Crises ◽  
Double Hurdle ◽  
Debt Repayment

When do private creditors versus debtor states accept a greater burden in resolving sovereign debt crises? In this study, we argue that distributive politics helps explain the “haircut”—or losses—private creditors take in debt restructuring cases. Despite the expected convergence of partisan policies in a globalized economy, we argue that right and left leaders extract different settlements in debt negotiations. Left governments, representing constituents most likely to be hurt from higher debt repayment, credibly demonstrate more bargaining power and extract greater concessions from creditors. Distributive politics, however, is an indeterminate factor in explaining states entrance into debt negotiations. We use recently released data on the outcome of sovereign debt restructuring cases between states and private creditors from 1975 to 2013 to test our expectations. Results from a double-hurdle model indicate that creditors receive a larger haircut when negotiating with left governments.

Book Reviews

2016 ◽  
Vol 54 (4) ◽  
pp. 1399-1401
Keyword(s):  
Sovereign Debt ◽  
Columbia University ◽  
Debt Restructuring ◽  
Formal Framework ◽  
Contractual Approach ◽  
Debt Crises ◽  
Specific Implementation ◽  
The University

John O. S. Wilson of the University of St. Andrews reviews “Too Little, Too Late: The Quest to Resolve Sovereign Debt Crises,” edited by Martin Guzman, José Antonio Ocampo, and Joseph E. Stiglitz. The Econlit abstract of this book begins: “Fifteen papers, most originally presented at the conference 'Frameworks for Sovereign Debt Restructuring' held at Columbia University in November 2014, examine general issues and goals of debt restructuring as well as the deficiencies of the current nonsystem, focusing on an analysis of the resolution of Argentina's and Greece's debt crises, possible improvements in the contractual approach, and specific implementation proposals for a multinational formal framework.”

scholarly journals Governing Sovereign Debt Restructuring Through Regulatory Standards

2015 ◽  
Vol 6 (2) ◽  
Author(s):  
Skylar Brooks ◽  
Domenico Lombardi
Keyword(s):  
Financial Stability ◽  
Sovereign Debt ◽  
Soft Law ◽  
Debt Restructuring ◽  
The Core ◽  
Hard Law ◽  
Regulatory Standards ◽  
Debt Crises ◽  
Further Development ◽  
The International Monetary Fund

AbstractIn recent years, a number of costly and destabilizing sovereign debt crises – from Argentina and Greece to Ukraine – have served as a forceful reminder that the international community lacks an agreed-upon framework for resolving debt crises and, when necessary, restructuring sovereign debt in a timely, orderly, and equitable manner. To help address this apparent governance gap, the paper argues that there is an important but underutilized role for the Financial Stability Board (FSB) in governing sovereign debt restructuring. More specifically, in a governance domain that is relatively fragmented between uncoordinated, even sometimes competing, rules and rule-makers, the FSB could serve as the focal institution responsible for overseeing the coordination and further development of soft law regulatory standards for sovereign debt restructuring. The reasons for FSB governance in this domain are simple and compelling, relating to both the nature of the debt restructuring regime and its evolution to date, as well as the specific institutional features of the FSB and the core tasks it performs. Although there remains room for treaty-based organizations like the International Monetary Fund (IMF) and United Nations (UN) to develop a hard law approach to sovereign debt restructuring, the FSB, we argue, is best positioned to strengthen and oversee the existing soft law approach, which currently prevails as the modus operandi of the present debt restructuring framework.

Why Venezuela’s Debt Restructuring Is More Challenging than Past Restructurings

2018 ◽  
Keyword(s):  
Economic Crisis ◽  
Sovereign Debt ◽  
Economic Data ◽  
Debt Restructuring ◽  
Sovereign Bond ◽  
Key Features ◽  
Debt Crises ◽  
The Government ◽  
Interest Payments

Venezuela’s debt restructuring could be the fourth-largest sovereign restructuring in history. The country’s default was triggered by missed interest payments on both government and Petroleos de Venezuela S.A. (PDVSA) bonds in November 2017. Shortly thereafter, the government announced its intention to restructure its debt. This article compares Venezuela’s crisis with prior sovereign bond defaults and argues that several key features will make restructuring Venezuela’s debt more complex and likely more protracted than in past sovereign debt crises, with likely larger-than-average losses experienced by bondholders. These include Venezuela’s heavy annual debt maturities through the next decade, the interdependence of government and PDVSA finances, the extent of the economic crisis in the country, elevated sociopolitical tensions, lack of transparency on economic data, and U.S. sanctions imposed on Venezuela.

Jurisdiction and Cognate Matters

2018 ◽  
Author(s):  
Hayk Kupelyants
Keyword(s):  
Sovereign Debt ◽  
English Court ◽  
Debt Restructuring ◽  
International Jurisdiction ◽  
Class Actions ◽  
Brussels Regulation

Chapter 3 examines the international jurisdiction in sovereign debt disputes and particularly the following matters: service of proceedings; the jurisdiction under the Brussels Regulation, the jurisdiction under English national rules; individual standing of beneficial bondholders; class actions. The chapter also examines the issue of pre-emptive strikes in sovereign debt litigation, in other words whether private creditors may initiate legal actions before the conclusion of the sovereign debt restructuring and how courts may constrain such litigation. The chapter argues that the English courts may stay proceedings if they are brought in contravention of the powers of bondholders under majority action clauses. The chapter lastly addresses the issue of whether the majority may modify the bonds after the English court has issued a judgment.

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