End of the road for sovereign debt consensus

The nature of sovereign debt reschedulings is changing as private sector bail-ins of diverse groups of bondholders replace the Brady-style deals that used to be negotiated between borrowers and tight groups of creditors. Lawyers have their work cut out.

Brady bonds and disintermediation have transformed the sovereign debt market and, as a result, sovereigns Wnding themselves in diYculties have had to engage in a process of dialogue with as wide an investment community as possible. Unfortunately, parallel shifts in this market mean that the opportunities for dialogue in sovereign reschedulings are being eroded and the future for these deals is hard to predict.

By the mid-1990s, it would be fair to say that the

Brady process of resolving government debt defaults had been successfully established.