Sovereign bonds have been successfully restructured by three countries to date. Pakistan, Ecuador and Ukraine launched market-based operations, persuading holders of bonds these countries said they could not service to accept new bonds with longer maturities and lower returns. The choice for investors was either to get nothing if the countries defaulted, or accept the new bonds on less favourable terms. So far, these bond exchanges have satisfied the troubled countries, the international financial institutions, and the banks. Only one group remains unsatisfied: the bondholders. Now they are getting organized and fighting back. From now on countries and banks are likely to have to do more than pay lip service to bondholders' and creditors' rights if they are to keep bringing successful exchange offers to market. And the debate now rages over whether it is possible to draft a broadly acceptable code of conduct for such debt negotiations, or whether...
