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Individual Enforcement Rights in International Sovereign Bonds

  • Häseler, Sönke
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    Sovereign bonds are notoriously hard to enforce. What little rights bondholders have can be vested either collectively or individually. It seems that investors, particularly in the US market, traditionally had a preference for the latter, which hindered financial market reform projects, such as the universal adoption of collective action clauses in 2003. This paper uses a range of theoretical approaches to discuss whether it is indeed in the bondholder’s collective interest to be allowed to individually sue and attach the debtor country’s assets following a default. Furthermore, it examines the landmark case of Elliott Associates v. Peru to attempt a quantitative assessment of just how much sovereign bondholders actually value individual enforcement rights. I find that even the single most important event to reinforce creditor rights in recent years had no noticeable impact on bond prices.

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    File URL: http://mpra.ub.uni-muenchen.de/11518/1/MPRA_paper_11518.pdf
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    Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 11518.

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    Date of creation: 10 Nov 2008
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    Handle: RePEc:pra:mprapa:11518
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    1. Rose, Andrew K, 2002. "One Reason Countries Pay Their Debts: Renegotiation and International Trade," CEPR Discussion Papers 3157, C.E.P.R. Discussion Papers.
    2. Jeremy Bulow & Kenneth Rogoff, 1998. "Sovereign Debt: Is to Forgive to Forget," Levine's Working Paper Archive 209, David K. Levine.
    3. Bulow, Jeremy & Rogoff, Kenneth S., 1989. "A Constant Recontracting Model of Sovereign Debt," Scholarly Articles 12491028, Harvard University Department of Economics.
    4. Michael P. Dooley, 2000. "Can Output Losses Following International Financial Crises be Avoided?," NBER Working Papers 7531, National Bureau of Economic Research, Inc.
    5. Eduardo Borensztein & Ugo Panizza, 2008. "The Costs of Sovereign Default," IMF Working Papers 08/238, International Monetary Fund.
    6. Gande, Amar & Parsley, David C., 2005. "News spillovers in the sovereign debt market," Journal of Financial Economics, Elsevier, vol. 75(3), pages 691-734, March.
    7. Sturzenegger, Federico & Zettelmeyer, Jeromin, 2008. "Haircuts: Estimating investor losses in sovereign debt restructurings, 1998-2005," Journal of International Money and Finance, Elsevier, vol. 27(5), pages 780-805, September.
    8. Michelle White, 2002. "Sovereigns in Distress: Do They Need Bankruptcy?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 33(1), pages 287-320.
    9. Marcus Miller & Dania Thomas, 2007. "Sovereign Debt Restructuring: The Judge, the Vultures and Creditor Rights," The World Economy, Wiley Blackwell, vol. 30(10), pages 1491-1509, October.
    10. Kris James Mitchener & Marc D. Weidenmier, 2005. "Supersanctions and Sovereign Debt Repayment," NBER Working Papers 11472, National Bureau of Economic Research, Inc.
    11. Michael Bradley & James D. Cox & Mitu Gulati, 2010. "The Market Reaction to Legal Shocks and Their Antidotes: Lessons from the Sovereign Debt Market," The Journal of Legal Studies, University of Chicago Press, vol. 39(1), pages 289-324, 01.
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