Creatingaframeworkforsovereigndebtrestructuringthatworks 1. Impartiality requires that actors, institutions, and information involved in debt workouts are free from bias and undue influence. Sovereign debt is issued by the national government in a foreign currency in. In the absence of a legal framework for sovereign debt restructurings good faith negotiations are a key part of ensuring an orderly restructuring. Debt restructuring might have been accomplished with greater speed and less cost had a formal mechanism existed. Is subsaharan africa facing another systemic sovereign debt. Debt restructuring an overview sciencedirect topics.
Sovereign default, debt restructuring, and recovery rates. The stanford rock center hosted a discussion on sovereign debt restructuring with two leading experts in the field. Summary concern is increasing about the prospect of a new sovereign debt crisis in countries across subsaharan africa. Sovereign debt crises involve debt restructurings characterized by a mix of facevalue haircuts and maturity extensions. Sovereign debt restructuring after argentina arturo c. While it is natural for creditors and debtors to pursue. A modellaw approach 9 of a sovereign debt restructuring. Public debt restructuring and banking james roaf sovereign asset and liability management division monetary and capital markets department, imf world bankimffederal reserve system seminar for senior bank supervisors from emerging markets washington dc, october 18, 2007. This book provides a thorough legal analysis of sovereign indebtedness, examining four typologies of sovereign debt bilateral debt, multilateral debt, syndicated debt and bonded debt in relation to three crucial contexts. Sovereign debt also referred to as government debt, public debt, and national debt is a central governments debt. If youre looking for a free download links of debt restructuring pdf, epub, docx and torrent then this site is not for you.
Seven years on seems like an appropriate point at which to critique how the crisis has been handled and to assess whether policy changes will be required should it flare up again. These cases attest to the fact that international financial markets have changed in ways that make restructurings more difficult to accomplishhence the need for formal sovereign debt restructuring arrangements. I find support for the grossman and van huyk model of excusable defaults. Mar 17, 2017 puerto rico has incurred debt well beyond its ability to repay. In particular, there are a number of lessons to be learned from the greek debt restructuring of 2012. Apr 24, 2019 debt restructuring is a method used by companies to alter the terms of debt agreements in order to achieve some advantage with outstanding debt obligations. The repercussions of a national default are allencompassing as global markets are intricately interwoven in the modern world. The prevalence of maturity extensions has been hard to reconcile with economic theory.
I use data on 180 sovereign defaults to analyze what determines the recovery rate after a debt restructuring process. The prospect of a court injunction requiring the sovereign borrower to pay those creditors that decline to participate in a debt restructuring ratably with any payments made to those creditors that do provide the country with debt relief. Mar 10, 2017 form and content of the debt restructuring. In a new report, the committee on international economic policy and reform examine sovereign debt crises and present procedures for restructuring the debt of bankrupt sovereigns at the euroarea. Aug 09, 2016 a new creditor weapon had been uncloaked. We develop a model of endogenous debt restructuring that captures key facts of sovereign debt and restructuring episodes. Debt restructuring, by region of debtor country 302 12. Rock center restructuring sovereign debt in the 21st. A guide for economists and practitioners is an attempt to build some structure around the issues of sovereign debt to help guide economists, practitioners and policymakers through this complicated, but not intractable, subject. Sovereign debt restructuring main drivers and mechanism. Exploring ways to improve the sovereign debt restructuring process is a key part of the.
Restructuring sovereign debt barry eichengreen a t the end of 2001, in a speech to the national economists club, anne krueger, the first deputy managing director of the international monetary fund, pointed to a. When and how often was sovereign debt restructured. Jun 09, 2017 the stanford rock center hosted a discussion on sovereign debt restructuring with two leading experts in the field. This paper examines the causes, processes, and outcomes of barbados 201819 sovereign debt restructuringits first ever. There is a growing co nsensus that the present process for restructuring the debts of a sovereign is more prolonged, more unpredictable and more damaging to the country and its creditors than would be desirable. A mechanism to regulate sovereign debt restructuring in. Resolution on sovereign debt restructuring adopted by. Sovereign debt restructurings may experience marginal changes as a result of recent modifications in contractual terms being incorporated into. Protect the value of the assets and the rights of the creditors to avoid litigation. Restructuring aims achieve the restructuring over a short time of period to reduce disruptions and reaccess capital markets. Data limitations and the absence of a legal procedure to deal with sovereign debt i. Roadmap and guide for sovereign debt workouts unctad. Pdf tracing iraqi sovereign debt through defaults and. It achieved very large debt relief over 50 percent of 2012 gdpwith minimal financial disruption, using a combination of new legal techniques, excep.
Jan 11, 2018 even putting aside the greek debt restructuring of 2012, it turns out that, unlike the death penalty, sovereign debt restructuring has not been abolished in europe. Pdf on jan 1, 2011, kern alexander and others published sovereign debt restructuring in. Sovereign debt sovereign credit is the money owed by a countrys government to its creditors. An autopsy jeromin zettelmeyer, christoph trebesch, and mitu gulati abstract the greek debt restructuring of 2012 stands out in the history of sovereign defaults. While it is natural for creditors and debtors to pursue their selfinterest, debt workouts require a neutral. Puerto rico and the netherworld of sovereign debt restructuring. Authors kirsten erichsen and andrew wilkinson sovereign debt restructuring. Sovereign debt examines what it will take to overcome the challenges of this market and how you can deal with the uncertainty surrounding it. The eurozone sovereign debt crisis began in the spring of 2010. Lee buchheit, guillaume chabert, chanda delong, and jeromin zettelmeyer.
The implicit seniority in sovereign debt is an understudied topic, on which. Stiglitz, martin guzman, domenico lombardi, jose antonio ocampo and jan svejnar the conference frameworks for sovereign debt restructuring was held at columbia university on november 17, 2014 with the sponsorship of the initiative for policy dialogue ipd. Creatingaframeworkforsovereigndebt restructuring thatworks 1. Free university of berlin and hertie school of governance. The supreme court put a stop to this effort, holding that congress in the bankruptcy code barred the commonwealth from enacting its own restructuring regime. Use the free adobe acrobat reader to view this pdf file. Modest restructuring of public debts, mainly through extending.
Pdf in recent years, a number of costly and destabilizing sovereign debt. Drcafta free trade agreement, and by a continuation of the ongoing. Sovereign debt genesis restructuring litigation mauro. Working paper 1410 the wharton financial institutions center the wharton school, university of pennsylvania, pa abstract debt restructuring is gaining acceptance as a policy tool for resolving sovereign debt crises. Proposals for reform of sovereign debt restructuring. Restructuring is a complex issue it involves positive and negative aspects, which need to be analysed in order to be able to determine whether it can deliver any added value. The restructuring was comprehensive, featuring several rarely used approaches, including the restructuring of treasury bills, and the use of a retrofitted collective action mechanism. They translate into more specific recommendations for each step of a sovereign debt workout, set out below and in more detail in the guide. There is no court to approve a debt restructuring plan to. Debt restructuring is a method used by companies to alter the terms of debt agreements in order to achieve some advantage with outstanding debt obligations. Resolution on sovereign debt restructuring adopted by general assembly establishes multilateral framework for countries to emerge from financial commitments texts on international decade for. Even putting aside the greek debt restructuring of 2012, it turns out that, unlike the death penalty, sovereign debt restructuring has not been abolished in europe. An international bankruptcy court would require that countries that adhere to the mechanism sacrifice sovereign immunity and would be associated with complex geopolitical problems. Sovereign debt restructuring main drivers and mechanism summary this briefing provides an overview of the main issues relating to the restructuring of sovereign debt, and outlines the factors which impact the decision as to whether or not to proceed with debt restructuring.
The prospect of a court injunction requiring the sovereign borrower to pay those creditors that decline to participate in a debt restructuring ratably with any payments made to those creditors that do. Barbados 201819 sovereign debt restructuringa sea change. Fifteen years after the international monetary funds famous attempt to implement a multilateral legal framework for sovereign debt restructuring sdrm, there is. This paper attempts to provide a playbook for the sovereign debt restructuring process, drawing on the experience with sovereign debt restructuring since the 1980s. Recent issues and reforms tapas strickland over the past decade, 14 countries have undertaken a total of 18 debt restructurings. Sovereign debt, financial crises, debt restructuring, debt defaults, paris. Frameworks for sovereign debt restructuring conference report joseph e. Sovereign debt restructurings do constitute a recurrent phenomenon in emerging and developing economies. Risk management optimization for sovereign debt restructuring andrea consiglio stavros a. Sovereign debt restructurings 19502010 international monetary. It attempted to address its fiscal woes through legislation allowing the restructuring of some its debt. Sovereign debt restructuringrecent developments and. Subscribe to this free journal for more curated articles on this topic. Sovereign debt restructuring recent developments and implications for the funds legal and policy framework executive summary there have been important developments in sovereign debt restructuring since the last executive board discussion of the subject in 2005.
A mechanism to regulate sovereign debt restructuring in the euro area 2 german council of economic experts sustainable public debt, if needed by initiating a deeper debt restructuring including debt reductions. A massive amount of sovereign debt restructuring has in fact occurred in europe since the crisis began in 2010 but the losses have not been visited on commercial creditors. Sovereign debt restructuring end of the process depends on type of mechanism. Sovereign debt restructuring obtain debt sustainability by reducing debt burden in an orderly manner.
Restructuring sovereign debt barry eichengreen barry. Is subsaharan africa facing another systemic sovereign. Sovereign debt restructurings do constitute a recurrent phenomenon in emerging. Pdf governing sovereign debt restructuring through regulatory. Investors accepting or being forced to accept through the use of collective action clauses the greek offer that finally came on 21 february 2012 would receive for every 100 of their old ggbs a consideration of. May 23, 2019 sovereign debt also referred to as government debt, public debt, and national debt is a central governments debt. Legitimacy requires that the establishment, operation, and outcomes of mechanisms. The debt restructuring has helped to set barbados public debt on a clear downward.
Concerns surrounding some of these restructurings have led policymakers and capital market participants. Debt restructuring is a process that allows a private or public company or a sovereign entity facing cash flow problems and financial distress to reduce and renegotiate its delinquent debts to improve or restore liquidity so that it can continue its operations. The restructuring was comprehensive, featuring several rarely used approaches, including the restructuring of treasury bills, and the use of a retrofitted. How to restructure sovereign debt peterson institute.
Sovereign debt restructuring in europe buchheit 2018. The form of the debt restructuring was an exchange of old ggbs for new ggbs. Jun 24, 2019 sovereign debt sovereign credit is the money owed by a countrys government to its creditors. If the debtor and creditors were able to agree a restructuring between themselves, they would of course be free to do so without having to invoke the mech anism. Pdf in 1979 iraq was a net creditor to the world, due to its large oil reserves and lack of external debt. The economics and law of sovereign debt and default. Debt restructuring is a process that allows a private or public company or a sovereign entity facing cash flow problems and financial distress to reduce and renegotiate its delinquent debts to improve or restore liquidity so that it can continue its operations replacement of old debt by new debt when not under financial distress is called refinancing. A restructuring framework which credibly stipulates a. Why do creditors recover, in some cases, more than 90%, while in other cases they recover less than 10%. Gdplinked securities can provide real value in future restructurings. Sovereign debt restructurings may experience marginal changes as a result of recent modifications in contractual terms being incorporated into new bond issues, but for the most part they will.
Consequently, the international community has repeatedly explored options to increase the predictability and orderliness of debt workouts, of which the debate on the sovereign debt restructuring mechanism sdrm proposed. Estimating the risk free rate of return emerging countries data limitations and the absence of a legal procedure to deal with sovereign debt i. Risk management optimization for sovereign debt restructuring. This briefing provides an overview of the main issues relating to the restructuring of sovereign debt, and outlines the factors which impact the decision as to whether or not to proceed with debt restructuring. The sovereign debt restructuring mechanism sdrm was proposed by the imf in 2001 to reduce the creditor coordination problem in the event of debt restructurings for bond debt, the holdings of which are much more dispersed than the concentrated syndicated bank loans which featured in the debt crisis of the 1980s. Explores the past, present, and future of sovereign debt.
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