The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms & Conditions, Privacy Policy and Cookies before using this site.

All material subject to strictly enforced copyright laws. © 2021 Euromoney, a part of the Euromoney Institutional Investor PLC.

Sovereign work-outs: a new idea

Argentina's de facto default on $130 billion in face value of debt - investors who've seen the price of their bonds more than halve to 35 cents on the dollar in four months are in no doubt that this is a default-like loss, if not yet a legal default - and the tortuous progress of its supposedly voluntary and orderly debt restructuring, which shows no sign of being either, have drawn renewed and urgent calls for a better approach to sovereign debt work-outs.


There are three possibilities: large scale bail-outs by the G7 and the IMF, which markets now realize are no longer likely; some kind of sovereign bankruptcy court, though what court might claim the legal right or enforcement mechanisms to attach and dispose of sovereign assets within a country's own borders, no-one knows; or... something else.


So last month's simulation hosted in New York by Carnegie Mellon University of a new proposal by Adam Lerrick and Allan Meltzer, both of Meltzer commission fame, for an official floor of support during a sovereign debt default and restructuring, is worthy of serious consideration.


The heart of the Lerrick-Meltzer proposal is that official sector funds should not be used to compensate lenders for their bad credit decisions, but should be used to protect them from loss arising from market failure during a work-out.




You have reached premium content. Please log in to continue reading.

Read beyond the headlines with Euromoney

For over 50 years, our readers have looked to Euromoney to stay informed about the issues that matter in the international banking and financial markets. Find out more about our different levels of access below.

SUBSCRIBE ONLINE TODAY

Unlimited access to Euromoney.com and Asiamoney.com

Expert comment, long reads and in-depth analysis interviews with senior finance professionals

Access the results of our market-leading annual surveys across core financial services

Access the results of our annual awards, including the world-renowned Awards for Excellence

Your print copy of Euromoney magazine delivered monthly

£73.75 per month

Billed Annually

FREE 7 DAY TRIAL

Unlimited access to Euromoney.com and Asiamoney.com, including our top stories, long reads, expert analysis, and the results of our annual surveys and awards

Sign up to any of our newsletters, curated by our editors

LOGIN NOW

Already a user?

We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree