This paper develops a new model of debt renegotiation in a structural framework, that accounts for both taxes and bankruptcy costs. We investigate situations where the manager can optimally (on behalf of the equity holder) impose a permanent coupon reduction to creditors, given that the new...

Lack of support for the Sovereign Debt Restructuring Mechanism (SDRM) discussion at the IMF a decade ago has encouraged several debt NGOs to actively advance proposals for sovereign debt arbitration - a bankruptcy-type arbitral tribunal to handle sovereign debt disputes in a collective manner....

The Eurozone official sector has declared that the belated restructuring of Greek bonds held by private sector creditors in 2012 was a “unique and exceptional” event, never, ever to be repeated in any other Eurozone country. Maybe so. But if this assurance proves in time to be as fragile as...

The history of sovereign debt lending and borrowing goes back to ancient times. Sovereigns borrow money for reasons similar to individuals. The vital difference between the two however, is one of recovery. Unlike individuals, a sovereign's assets may not be seized and liquidated for recovery of...

The European sovereign debt crisis has generated a number of controversial restructuring proposals that would have seemed appropriate only for emerging markets just a few years ago, but now are among the few options available to sustain the Eurozone. The leading proposal involves legislation...