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Structuring and Restructuring Sovereign Debt: The Role of Seniority Author info | Abstract | Publisher info | Download info | Related research | Statistics Bolton, Patrick
Jeanne, Olivier
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In an environment characterized by weak contractual enforcement, sovereign lenders can enhance the likelihood of repayment by making their claims more difficult to restructure. We show within a simple model how competition for repayment between lenders may result in sovereign debt that is excessively difficult to restructure in equilibrium. Alleviating this inefficiency requires a sovereign debt restructuring mechanism that fulfills some of the functions of corporate bankruptcy regimes, in particular the enforcement of seniority and subordination clauses in debt contracts.
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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number
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Date of creation: Feb 2005Date of revision:
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Keywords: collective action clause ; debt dilution ; seniority ; sovereign debt ; sovereign default ; Other versions of this item:
Find related papers by JEL classification: F34 - International Economics - - International Finance - - - International Lending and Debt Problems G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
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Patrick Bolton & Olivier Jeanne, 2007.
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