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Sovereign debt restructuring : the Judge, the vultures and creditor rights

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  • Miller, Marcus

    (Department of Economics, CEPR and CSGR, University of Warwick)

  • Thomas, Dania

    (CSGR, University of Warwick)

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 the key issues of Transition and Aggregation - two of the tasks envisaged for the IMF’s still-born Sovereign Debt Restructuring Mechanism. For the future, we discuss how judge-mediated sovereign debt restructuring (together with creditor committees) could complement the alternative promoted by the US Treasury, namely collective action clauses in sovereign bond contracts

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Bibliographic Info

Paper provided by University of Warwick, Department of Economics in its series The Warwick Economics Research Paper Series (TWERPS) with number 757.

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Length: 27 pages
Date of creation: 2006
Date of revision:
Handle: RePEc:wrk:warwec:757

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Keywords: Sovereign debt crises ; debt restructuring ; holdout creditors ; collective action clauses;

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  1. Kenneth M. Kletzer and Brian D. Wright., 1998. "Sovereign Debt as Intertemporal Barter," Center for International and Development Economics Research (CIDER) Working Papers, University of California at Berkeley C98-100, University of California at Berkeley.
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  5. Kohlscheen, E. & O’Connell, S. A., 2007. "Trade Credit, International Reserves and Sovereign Debt," The Warwick Economics Research Paper Series (TWERPS), University of Warwick, Department of Economics 833, University of Warwick, Department of Economics.
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  7. Antonio Merlo & Charles Wilson, 1997. "Efficient delays in a stochastic model of bargaining," Economic Theory, Springer, Springer, vol. 11(1), pages 39-55.
  8. Ghosal, Sayantan & Miller, Marcus, 2003. "Coordination Failure, Moral Hazard and Sovereign Bankruptcy Procedures," CEPR Discussion Papers, C.E.P.R. Discussion Papers 3729, C.E.P.R. Discussion Papers.
  9. Jeremy I. Bulow & Kenneth Rogoff, 1987. "A Constant Recontracting Model of Sovereign Debt," NBER Working Papers 2088, National Bureau of Economic Research, Inc.
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  16. 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.
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Cited by:
  1. Kurtis Swope & Pamela Schmitt & John Cadigan & Robert Shupp, 2009. "The Holdout Problem and Urban Sprawl: Experimental Evidence," Departmental Working Papers, United States Naval Academy Department of Economics 24, United States Naval Academy Department of Economics.
  2. Sayantan Ghosal & Marcus Miller & Kannika Thampanishvong, 2010. "Delay and Haircuts in Sovereign Debt: Recovery and Sustainability," Discussion Paper Series, Department of Economics, Department of Economics, University of St. Andrews 201004, Department of Economics, University of St. Andrews.
  3. 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.
  4. Kurtis Swope & Pamela Schmitt & John Cadigan & Robert Shupp, 2008. "An Experimental Study of the Holdout Problem in a Multilateral Bargaining Game," Departmental Working Papers, United States Naval Academy Department of Economics 21, United States Naval Academy Department of Economics.
  5. Ghosal, Sayantan & Miller, Marcus & Thampanishvong, Kannika, 2010. "Delay and Haircuts in Sovereign Debt: Recovery and Sustainability," SIRE Discussion Papers, Scottish Institute for Research in Economics (SIRE) 2010-100, Scottish Institute for Research in Economics (SIRE).
  6. Häseler, Sönke, 2008. "Individual Enforcement Rights in International Sovereign Bonds," MPRA Paper 11518, University Library of Munich, Germany.

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