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Government Involvement in Corporate Debt Restructuring

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Author Info

  • David A. Grigorian
  • Faezeh Raei

Abstract

The paper examines recent episodes of government involvement in corporate debt restructurings. It argues that corporate debt restructuring is an important step toward recovery from a financial crisis. We then discuss the rationale for, and modalities of, the state intervention in corporate debt workouts through reviewing six countries with large scale corporate debt workouts. Case studies reveal that the costs of corporate sector rescue are significant and in several cases on par with the costs of financial sector bailouts. The paper sheds light on the importance of contingent liabilities and associated risks to government balance sheet from the corporate debt side and emphasizes the need for improved contingency planning for corporations with potential systemic impact.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 10/260.

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Length: 34
Date of creation: 01 Nov 2010
Date of revision:
Handle: RePEc:imf:imfwpa:10/260

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Postal: International Monetary Fund, Washington, DC USA
Phone: (202) 623-7000
Fax: (202) 623-4661
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Web page: http://www.imf.org/external/pubind.htm
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Related research

Keywords: Asset management; Banking sector; Corporate sector; Economic recession; Economic recovery; Governance; debt restructuring; recapitalization; banking; banking system; financial crisis; asian crisis; recession; bank recapitalization; asset management companies; bank restructuring; sovereign risk; contingent liabilities; liability management; deposit insurance; banking crisis; banking crises; bank policy; working capital; economic crisis; national bank; state intervention; loan classification; debt servicing; crisis management; banking distress; bank liquidity; bank assets; investment banking; debt overhang; systemic crisis; bank of england; banking services; present value; bankrupt; political interference; financial restructuring; nonperforming loan; debt crisis; present value of debt; legal regimes; bank operations; bank lending; resolution of banking crises; going concern value; financial sector crisis; bank debt; bank capital; credit boom; contagion; deposit insurance scheme; bank group; bank creditors; financial distress; banking asset; collateralization; systemic banking crises; bank balance sheets; direct financing; global economic crisis; financial crises; financial incentives; legal systems; bank intervention; bilateral debt; short term debt; bank assistance; regulatory forbearance; holding company; savings bank;

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Cited by:
  1. Manuela Goretti & Marcos Souto, 2013. "Macro-Financial Implications of Corporate (De)Leveraging in the Euro Area Periphery," IMF Working Papers 13/154, International Monetary Fund.
  2. Christoph Trebesch & Michael G Papaioannou & Udaibir S. Das, 2012. "Sovereign Debt Restructurings 1950-2010," IMF Working Papers 12/203, International Monetary Fund.
  3. Yan Liu & Christoph B. Rosenberg, 2013. "Dealing with Private Debt Distress in the Wake of the European Financial Crisis A Review of the Economics and Legal Toolbox," IMF Working Papers 13/44, International Monetary Fund.

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