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Capital Markets

Debt restructurings: Gramercy urges Europe to learn Latin lessons

Investor points to Uruguay, Dominican Republic; Bullish on Argentine sovereign debt

One of the leading players in Argentina’s debt swap earlier this year says that troubled eurozone countries such as Greece should heed the lessons of the Latin American nation’s protracted restructuring process and implement a pre-emptive private-sector solution as soon as possible.

Robert Koenigsberger, founder and chief investment officer of Gramercy, a dedicated emerging markets fund manager that specializes in distressed debt, says that policymakers "are throwing money at Greece and others without reaching a resolution".

Instead, he urges Europe’s stressed sovereigns to reprofile their debt and involve the private sector in any solution. "They can restructure their debt so that it becomes sustainable. This could occur with or without a haircut and have the new restructured bonds collateralized by the EU, for example."

Miscreants

Koenigsberger points to two past Latin American miscreants, the Dominican Republic and Uruguay, as examples of restructurings that were pre-emptive, inclusive and ultimately successful steps towards the countries’ rehabilitation. "Although in the short run it may make the solution seem more painful, in the long run by bailing-in all sides earlier rather than later, comprehensive and sustainable outcomes can be achieved," he says.

Gramercy was one of the key players in bringing Argentina back to the table with those investors that had declined to participate in the country’s debt restructuring in 2005, when there was a 68% haircut.

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