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Government Involvement in Corporate Debt Restructuring: Case Studies from the Great Recession

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  • Mr. David A. Grigorian
  • Ms. 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.

Suggested Citation

  • Mr. David A. Grigorian & Ms. Faezeh Raei, 2010. "Government Involvement in Corporate Debt Restructuring: Case Studies from the Great Recession," IMF Working Papers 2010/260, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2010/260
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    References listed on IDEAS

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    1. International Monetary Fund, 2008. "Portugal: Staff Report for the 2008 Article IV Consultation," IMF Staff Country Reports 2008/323, International Monetary Fund.
    2. Oriol Aspachs-Bracons & Pau Rabanal, 2010. "The drivers of housing cycles in Spain," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 1(1), pages 101-130, March.
    3. Mr. Mark R. Stone, 2000. "Large-Scale Post-Crisis Corporate Sector Restructuring," IMF Policy Discussion Papers 2000/007, International Monetary Fund.
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    Cited by:

    1. Abraham,Facundo & Cortina Lorente,Juan Jose & Schmukler,Sergio L., 2020. "Growth of Global Corporate Debt : Main Facts and Policy Challenges," Policy Research Working Paper Series 9394, The World Bank.
    2. Ms. Manuela Goretti & Mr. Marcos R Souto, 2013. "Macro-Financial Implications of Corporate (De)Leveraging in the Euro Area Periphery," IMF Working Papers 2013/154, International Monetary Fund.
    3. Christoph Trebesch & Mr. Michael G. Papaioannou & Mr. Udaibir S Das, 2012. "Sovereign Debt Restructurings 1950-2010: Literature Survey, Data, and Stylized Facts," IMF Working Papers 2012/203, International Monetary Fund.
    4. Ms. Yan Liu & Mr. 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 2013/044, International Monetary Fund.

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