Why Venezuela’s Debt Restructuring Is More Challenging than Past Restructurings

2018 ◽  
Keyword(s):  
Economic Crisis ◽  
Sovereign Debt ◽  
Economic Data ◽  
Debt Restructuring ◽  
Sovereign Bond ◽  
Key Features ◽  
Debt Crises ◽  
The Government ◽  
Interest Payments

Venezuela’s debt restructuring could be the fourth-largest sovereign restructuring in history. The country’s default was triggered by missed interest payments on both government and Petroleos de Venezuela S.A. (PDVSA) bonds in November 2017. Shortly thereafter, the government announced its intention to restructure its debt. This article compares Venezuela’s crisis with prior sovereign bond defaults and argues that several key features will make restructuring Venezuela’s debt more complex and likely more protracted than in past sovereign debt crises, with likely larger-than-average losses experienced by bondholders. These include Venezuela’s heavy annual debt maturities through the next decade, the interdependence of government and PDVSA finances, the extent of the economic crisis in the country, elevated sociopolitical tensions, lack of transparency on economic data, and U.S. sanctions imposed on Venezuela.

Argentina debt deal hangs in balance amid COVID-19

2020 ◽  
Keyword(s):  
Sovereign Debt ◽  
Economic Recovery ◽  
Medium Term ◽  
Debt Restructuring ◽  
Content Type ◽  
The Government ◽  
Interest Payments

Significance The government announced its sovereign debt restructuring proposal on April 16, including a three-year moratorium, and an average haircut of 62% on interest payments (equivalent to 37.9 billion dollars) and 5.4% on capital (3.6 billion dollars). The proposal has already been rejected by the main bondholders, but Economy Minister Martin Guzman warns there will be no further offer. Impacts A deal would ease liquidity problems and facilitate access to fresh funds in the medium term, aiding post-COVID-19 economic recovery. A new default would hinder recovery and increase the risk of a new bout of hyperinflation. Global economic weakness will limit prospects for any export-led recovery.

Suturing the Open Veins of Ecuador: Debt, Default and Democracy

2009 ◽  
Vol 2 (1) ◽  
Author(s):  
Wade Mansell ◽  
Karen Openshaw
Keyword(s):  
Economic History ◽  
Sovereign Debt ◽  
Legal Aspects ◽  
Debt Burden ◽  
Legal Implications ◽  
Audit Commission ◽  
Obvious Benefit ◽  
The Government ◽  
Large Discount ◽  
Interest Payments

In 2008 the Ecuadorian government received a report on the legitimacy of the country's sovereign debt from an international audit commission appointed by Ecuador's current president, Rafael Correa. This concluded that much of the debt was tainted by illegality and illegitimacy and consequently did not merit repayment. Citing the report's findings as justification, the government stopped making interest payments on certain of the country's bonds, but, rather than repudiating them altogether, engineered a successful buyback at a large discount. Having thus reduced Ecuador's external commercial debt burden by about a third, the government is now planning to address multilateral and bilateral loans also adjudged unlawful by the commission.This article examines the robust approach adopted by the Correa administration to tackling Ecuador's public debts, placing it in the context of the country's troubled economic history and contrasting it with previous defaults and debt workouts which largely worked to Ecuador's disadvantage. In doing so, it considers the use which the government has made of the increasingly prominent concepts of odious and illegitimate debt as a means of combating the indebtedness of the South. The conclusion reached is that, regardless of the final position suggested by international law, the realities of international relations are likely to limit the practicality of legal remedies. Nevertheless, the case of Ecuador provides a new chapter in the continuing academic debate regarding unlawful debt.These, of course, are the legal aspects of Ecuador's endeavours to curtail expenditure desperately needed for other purposes. Underlying the legal implications is the reality of an impoverished nation called upon to continue to service or redeem 'debt' that brought no obvious benefit to the overwhelming majority of its people. Debt repayment has promoted impoverishment and also, if indirectly, facilitated devastating environmental degradation.

scholarly journals Long-Term Returns in Distressed Sovereign Bond Markets

2019 ◽  
Vol 19 (138) ◽  
pp. 1
Author(s):  
Jochen Andritzky ◽  
Julian Schumacher
Keyword(s):  
Sovereign Debt ◽  
Investment Strategy ◽  
Excess Return ◽  
Bond Markets ◽  
Debt Restructuring ◽  
Sovereign Bond ◽  
Sovereign Bonds ◽  
Before And After ◽  
Sovereign Bond Markets

Sovereign debt restructurings are perceived as inflicting large losses to bondholders. However, many bonds feature high coupons and often exhibit strong post-crisis recoveries. To account for these aspects, we analyze the long-term returns of sovereign bonds during 32 crises since 1998, taking into account losses from bond exchanges as well as profits before and after such events. We show that the average excess return over risk-free rates in crises with debt restructuring is not significantly lower than the return on bonds in crises without restructuring. Returns differ considerably depending on the investment strategy: Investors who sell during crises fare much worse than buy-and-hold investors or investors entering the market upon signs of distress

The Devil’s Haircut: Investor–State Disputes over Debt Restructuring

2018 ◽  
Vol 63 (8) ◽  
pp. 1889-1922 ◽  
Author(s):  
Matthew DiGiuseppe ◽  
Patrick E. Shea
Keyword(s):  
Sovereign Debt ◽  
Bargaining Power ◽  
Distributive Politics ◽  
Hurdle Model ◽  
Debt Restructuring ◽  
Double Hurdle Model ◽  
Globalized Economy ◽  
Debt Crises ◽  
Double Hurdle ◽  
Debt Repayment

When do private creditors versus debtor states accept a greater burden in resolving sovereign debt crises? In this study, we argue that distributive politics helps explain the “haircut”—or losses—private creditors take in debt restructuring cases. Despite the expected convergence of partisan policies in a globalized economy, we argue that right and left leaders extract different settlements in debt negotiations. Left governments, representing constituents most likely to be hurt from higher debt repayment, credibly demonstrate more bargaining power and extract greater concessions from creditors. Distributive politics, however, is an indeterminate factor in explaining states entrance into debt negotiations. We use recently released data on the outcome of sovereign debt restructuring cases between states and private creditors from 1975 to 2013 to test our expectations. Results from a double-hurdle model indicate that creditors receive a larger haircut when negotiating with left governments.

Venezuela’s Sovereign Debt Restructuring: The Elephant in the Room

2018 ◽  
Keyword(s):  
Natural Resources ◽  
Sovereign Debt ◽  
Debt Crisis ◽  
Oil Prices ◽  
Sovereign Debt Crisis ◽  
Ethical Considerations ◽  
Humanitarian Crisis ◽  
Debt Restructuring ◽  
The Government ◽  
Entire Economy

Dealing with Venezuela’s sovereign debt crisis is very different than it was during the 1980s and 1990s. The problem is much larger than oil prices; the entire economy has collapsed, including PDVSA. But beyond oil, there is politics. The government in Venezuela is an internationally sanctioned kleptocracy, ruling a country in grave social and humanitarian crisis, despite its possession of abundant natural resources, and regime change is not at all certain. Therefore, there are legal as well as reputational hazards, and moral and ethical considerations in Venezuela’s debt crisis. This article analyzes possible political scenarios, including the prospect of a transitional scenario within the current regime, for their impact on all forms of sovereign debt restructuring.

scholarly journals PELUANG AKUNTAN PUBLIK DALAM PROGRAM RESTRUKTURISASI UTANG BAGI USAHA KECIL DAN MENENGAH

2016 ◽  
Vol 4 (2) ◽  
pp. 91
Author(s):  
Sutjipto Ngumar
Keyword(s):  
Economic Crisis ◽  
Task Force ◽  
Debt Restructuring ◽  
The Public ◽  
Financial Consultant ◽  
Restructuring Process ◽  
The Government ◽  
Public Accountant

This paper is prapared to analyse the industrialist’s problems, particulary the little and Midle Business (UKM), paying their debt to the Bank, as the result of economic crisis endlesly. The government through the Jakarta Initiative Task Force (J.I.T.F.) and Fi-nancial Consultant, the Public Accountant which is appointed by Indonesian Accountant Asso-ciation (IAI), go to work as the facilitator, practice debt restructuring program, between obligator and creditor by win and win solution. lution. Public accountant is the partner of JITF as Financial Consultant, prepares the informations : e.g. debt’s document, Fi-nancial Statement, activity and strategy of business. The UKM’s information which have been arranged by public accountant used as another base for debt negotiation. The UKM among restructuring obtacle is that the information about restructuring process is not complete; the lack information of obligator and unhonesty of creditor.

Book Reviews

2016 ◽  
Vol 54 (4) ◽  
pp. 1399-1401
Keyword(s):  
Sovereign Debt ◽  
Columbia University ◽  
Debt Restructuring ◽  
Formal Framework ◽  
Contractual Approach ◽  
Debt Crises ◽  
Specific Implementation ◽  
The University

John O. S. Wilson of the University of St. Andrews reviews “Too Little, Too Late: The Quest to Resolve Sovereign Debt Crises,” edited by Martin Guzman, José Antonio Ocampo, and Joseph E. Stiglitz. The Econlit abstract of this book begins: “Fifteen papers, most originally presented at the conference 'Frameworks for Sovereign Debt Restructuring' held at Columbia University in November 2014, examine general issues and goals of debt restructuring as well as the deficiencies of the current nonsystem, focusing on an analysis of the resolution of Argentina's and Greece's debt crises, possible improvements in the contractual approach, and specific implementation proposals for a multinational formal framework.”

scholarly journals Sovereign Debt Restructurings

2021 ◽  
Vol 13 (2) ◽  
pp. 26-77
Author(s):  
Maximiliano Dvorkin ◽  
Juan M. Sánchez ◽  
Horacio Sapriza ◽  
Emircan Yurdagul
Keyword(s):  
Economic Theory ◽  
Discrete Choice ◽  
Sovereign Debt ◽  
Decision Rules ◽  
Dynamic Discrete Choice ◽  
Debt Restructuring ◽  
Book Value ◽  
Regulatory Costs ◽  
Debt Crises ◽  
Debt Dilution

Sovereign debt crises involve debt restructurings characterized by a mix of face value haircuts and maturity extensions. The prevalence of maturity extensions has been hard to reconcile with economic theory. We develop a model of endogenous debt restructuring that captures key facts of sovereign debt and restructuring episodes. While debt dilution pushes for negative maturity extensions, three factors are important in overcoming the effects of dilution and generating maturity extensions upon restructurings: income recovery after default, credit exclusion after restructuring, and regulatory costs of book value haircuts. We employ dynamic discrete choice methods that allow for smoother decision rules, rendering the problem tractable. (JEL E44, F34, F41, H63)

scholarly journals Governing Sovereign Debt Restructuring Through Regulatory Standards

2015 ◽  
Vol 6 (2) ◽  
Author(s):  
Skylar Brooks ◽  
Domenico Lombardi
Keyword(s):  
Financial Stability ◽  
Sovereign Debt ◽  
Soft Law ◽  
Debt Restructuring ◽  
The Core ◽  
Hard Law ◽  
Regulatory Standards ◽  
Debt Crises ◽  
Further Development ◽  
The International Monetary Fund

AbstractIn recent years, a number of costly and destabilizing sovereign debt crises – from Argentina and Greece to Ukraine – have served as a forceful reminder that the international community lacks an agreed-upon framework for resolving debt crises and, when necessary, restructuring sovereign debt in a timely, orderly, and equitable manner. To help address this apparent governance gap, the paper argues that there is an important but underutilized role for the Financial Stability Board (FSB) in governing sovereign debt restructuring. More specifically, in a governance domain that is relatively fragmented between uncoordinated, even sometimes competing, rules and rule-makers, the FSB could serve as the focal institution responsible for overseeing the coordination and further development of soft law regulatory standards for sovereign debt restructuring. The reasons for FSB governance in this domain are simple and compelling, relating to both the nature of the debt restructuring regime and its evolution to date, as well as the specific institutional features of the FSB and the core tasks it performs. Although there remains room for treaty-based organizations like the International Monetary Fund (IMF) and United Nations (UN) to develop a hard law approach to sovereign debt restructuring, the FSB, we argue, is best positioned to strengthen and oversee the existing soft law approach, which currently prevails as the modus operandi of the present debt restructuring framework.

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