European Parliament Library

The Problem that Wasn't :, Coordination Failures in Sovereign Debt Restructurings, Jeromin Zettelmeyer, Marcos Chamon, Ran Bi

Contrary to widespread expectation, debt renegotiations in the era of bond finance have generally been quick and involved little litigation. We present a model that rationalizes the initial fears and offers interpretations for why they did not materialize. When the exchange offer is sufficiently attractive vis-à-vis holding out, full participation can be an equilibrium. Legal innovations such as minimum participation thresholds and defensive exit consents helped coordinate creditors and avoid litigation. Unlike CACs, exit consents can be exploited to force high haircuts on creditors, but the ability of creditors to coordinate to block exit consents can limit overly aggressive use
Table Of Contents
Cover Page; Title Page; Copyright Page; Contents; I. Introduction; II. Experiences With Sovereign Debt Restructurings, 1998-2010; III. Model; A. Baseline Set-Up; B. Eqbuilirbia in the Baseline Set-Up; C. Endogenizing the Hair-Cut; D. Equilibria with Exit Consents and Minimum Participation Threshold; E. Equilibria Under Collective Action Clauses; IV. Equilibria With Large Players; V. Conclusion; Appendix; Figure 1. Possible Equilibria as a Function of the Haircut and Litigation Prospects; Figure 2. Equilibrium Haircut Offered by the Country
Literary Form
non fiction
Description based upon print version of record
Physical Description
1 online resource (53 p.)
Specific Material Designation
Form Of Item

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