GETTING RID OF SOVEREIGN DEBT
You are a bank. You have a loan on your books to a sovereign borrower. The borrower is bust and is restructuring. You want to get rid of the loan. How can you do it? There are two ways. You can sell the loan at a discount, or–assuming the terms of the restructuring agreement allow for this– you can convert it into equity in the country concerned. What are the problems?
There are three ways of selling a loan: assignment, participation, novation.
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