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Sovereign Debt Restructuring: The Judge, the Vultures and Creditor Rights

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  • Marcus Miller
  • Dania Thomas

Abstract

What role did the US courts play in the Argentine debt swap of 2005? What implications does this have for the future of creditor rights in sovereign bond markets? The Judge in the Argentine case has, it appears, deftly exploited creditor heterogeneity - between 'holdouts' seeking capital gains and institutional investors wanting a settlement - to promote a swap with a supermajority of creditors. Our analysis of Argentine debt litigation reveals a 'Judge-mediated' sovereign debt restructuring which resolves key issues of Transition and Aggregation - two of the tasks envisaged for the IMF's stillborn Sovereign Debt Restructuring Mechanism. For the future, we discuss how Judge-mediated sovereign debt restructuring (together with creditor committees) could complement Collective Action Clauses in sovereign bond contracts. Copyright 2007 The Authors Journal compilation Blackwell Publishing Ltd. 2007 .

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Bibliographic Info

Article provided by Wiley Blackwell in its journal World Economy.

Volume (Year): 30 (2007)
Issue (Month): 10 (October)
Pages: 1491-1509

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Handle: RePEc:bla:worlde:v:30:y:2007:i:10:p:1491-1509

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  1. Brian D. Wright & Kenneth M. Kletzer, 2000. "Sovereign Debt as Intertemporal Barter," American Economic Review, American Economic Association, vol. 90(3), pages 621-639, June.
  2. Broner, Fernando A & Martin, Alberto & Ventura, Jaume, 2007. "Sovereign Risk and Secondary Markets," CEPR Discussion Papers 6055, C.E.P.R. Discussion Papers.
  3. Antonio Merlo & Charles Wilson, 1997. "Efficient delays in a stochastic model of bargaining," Economic Theory, Springer, vol. 11(1), pages 39-55.
  4. Sayantan Ghosal & Marcus Miller, 2003. "Co-ordination Failure, Moral Hazard and Sovereign Bankruptcy Procedures," Economic Journal, Royal Economic Society, vol. 113(487), pages 276-304, 04.
  5. Rui Pedro Esteves, 2007. "Quis custodiet quem? Sovereign Debt and Bondholders` Protection Before 1914," Economics Series Working Papers 323, University of Oxford, Department of Economics.
  6. Kenneth Rogoff, 1999. "International Institutions for Reducing Global Financial Instability," Journal of Economic Perspectives, American Economic Association, vol. 13(4), pages 21-42, Fall.
  7. Jerome Sgard, 2004. "Are There Such Things as International Property Rights?," The World Economy, Wiley Blackwell, vol. 27(3), pages 387-401, 03.
  8. Michael P. Dooley, 2000. "Can Output Losses Following International Financial Crises be Avoided?," NBER Working Papers 7531, National Bureau of Economic Research, Inc.
  9. Bulow, Jeremy & Rogoff, Kenneth, 1989. "A Constant Recontracting Model of Sovereign Debt," Journal of Political Economy, University of Chicago Press, vol. 97(1), pages 155-78, February.
  10. Arturo C. Porzecanski, 2005. "From Rogue Creditors to Rogue Debtors: Implications of Argentina's Default," International Finance 0510010, EconWPA.
  11. Kohlscheen, E. & O’Connell, S. A., 2007. "Trade Credit, International Reserves and Sovereign Debt," The Warwick Economics Research Paper Series (TWERPS) 833, University of Warwick, Department of Economics.
  12. Oren Sussman & Alexander Guembel, 2005. "Sovereign Debt Without Default Penalties," OFRC Working Papers Series 2005fe17, Oxford Financial Research Centre.
  13. Amrita Dhillon & Javier García-Fronti & Sayantan Ghosal & Marcus Miller, 2006. "Debt Restructuring and Economic Recovery: Analysing the Argentine Swap," The World Economy, Wiley Blackwell, vol. 29(4), pages 377-398, 04.
  14. Irwin, Gregor & Penalver, Adrian & Salmon, Chris & Taylor, Ashley, 2008. "Dealing with country diversity: challenges for the IMF credit union model," Bank of England working papers 349, Bank of England.
  15. Gai, Prasanna & Hayes, Simon & Shin, Hyun Song, 2004. "Crisis costs and debtor discipline: the efficacy of public policy in sovereign debt crises," Journal of International Economics, Elsevier, vol. 62(2), pages 245-262, March.
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Cited by:
  1. Ghosal, Sayantan & Miller, Marcus & Thampanishvong, Kannika, 2010. "Delay and Haircuts in Sovereign Debt: Recovery and Sustainability," SIRE Discussion Papers 2010-100, Scottish Institute for Research in Economics (SIRE).
  2. John Cadigan & Pamela Schmitt & Robert Shupp & Kurtis Swope1, 2009. "An Experimental Study of the Holdout Problem in a Multilateral Bargaining Game," Southern Economic Journal, Southern Economic Association, vol. 76(2), pages 344-457, October.
  3. Häseler, Sönke, 2011. "Individual enforcement rights in international sovereign bonds," MPRA Paper 35331, University Library of Munich, Germany.
  4. Trebesch, Christoph, 2008. "Delays in Sovereign Debt Restructurings. Should we really blame the creditors?," Proceedings of the German Development Economics Conference, Zurich 2008 44, Verein für Socialpolitik, Research Committee Development Economics.

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