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Intercreditor Distribution in Sovereign Debt Restructuring

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  • Ousmène Mandeng
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    Abstract

    Intercreditor equity represents one of the main objectives of bankruptcy proceedings. Yet, recent restructurings of sovereign debt suggest that violation of intercreditor equity is common. While existing contractual provisions, and guidelines issued by creditor committees, establish fundamental principles about creditor treatment, they seem to remain too vague to guide debt restructuring processes effectively. The paper focuses on distribution, and argues that lack of clear guidelines for distribution may complicate and delay the resolution process and induce undue uncertainty about the predictability and viability of the restructuring outcome. The paper discusses and proposes parameters which may contribute to establishing explicit principles for the assessment of intercreditor equity in distribution.

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    Bibliographic Info

    Paper provided by International Monetary Fund in its series IMF Working Papers with number 04/183.

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    Length: 27
    Date of creation: 01 Sep 2004
    Date of revision:
    Handle: RePEc:imf:imfwpa:04/183

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    Related research

    Keywords: Paris Club; Sovereign Debt Restructuring Mechanism; present value; debt restructuring; sovereign debt; discount rate; sovereign debt restructuring; commercial creditors; bonds; debt reduction; commercial debt; debt relief; cash flow; private creditors; official creditors; bilateral creditors; bond; cash flows; discount rates; debt service; eurobonds; balance of payments; debtor country; debt contracts; multilateral creditors; bondholders; debt outstanding; commercial debt buy; sovereign borrowers; commercial creditor; debt ratios; central bank; stock of debt; debt stocks; debt reductions; traditional debt relief; bondholder; financial stability; repayments; bond contracts; actual debt; debt data; brady bond; international financial markets; bond issues; bilateral loans; debt management; discounting; par bonds; debt service reduction; international finance; amount of debt; market discount; sovereign debtors; bilateral debt; national debt; bilateral creditor; debt problems; brady bonds; multilateral debt; financial markets; debt exchanges; future cash flows; international lending; moral hazard; long-term debt; financial economics; effective interest rate;

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    References

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    1. Elisha A. Pazner & David Schmeidler, 1975. "Egalitarian Equivalent Allocations: A New Concept of Economic Equity," Discussion Papers 174, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    2. Jeremy Clark, 1998. "Fairness in Public Good Provision: An Investigation of Preferences for Equality and Proportionality," Canadian Journal of Economics, Canadian Economics Association, vol. 31(3), pages 708-729, August.
    3. M. Rabin, 2001. "Incorporating Fairness into Game Theory and Economics," Levine's Working Paper Archive 511, David K. Levine.
    4. Benjamin M. Friedman, 2000. "Debt Restructuring," NBER Working Papers 7722, National Bureau of Economic Research, Inc.
    5. Barry Eichengreen & Ashoka Mody, 2003. "Is Aggregation a Problem for Sovereign Debt Restructuring?," American Economic Review, American Economic Association, vol. 93(2), pages 80-84, May.
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    Cited by:
    1. Engelen, Christian & Lambsdorff, Johann Graf, 2009. "Hares and stags in Argentinean debt restructuring," Journal of International Economics, Elsevier, vol. 78(1), pages 141-148, June.
    2. Aitor Erce, 2012. "Selective sovereign defaults," Globalization and Monetary Policy Institute Working Paper 127, Federal Reserve Bank of Dallas.

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