Haircuts: Estimating Investor Losses in Sovereign Debt Restructurings, 1998-2005

Author/Editor:

Jeromin Zettelmeyer ; Federico Sturzenegger

Publication Date:

July 1, 2005

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

This paper estimates bond-by-bond "haircuts"-realized investor losses-in recent debt restructurings in Russia, Ukraine, Pakistan, Ecuador, Argentina, and Uruguay. We consider both external and domestic retructurings. Haircuts are computed as the percentage difference between the present values of old and new instruments, discounted at the yield prevailing immediately after the exchange. We find average haircuts ranging from 13 percent (Uruguay external exchange) to 73 percent (2005 Argentina exchange). We also find within-exchange variations in haircuts, depending on the instrument tendered. With exceptions, domestic residents do not appear to have been treated systematically better (or worse) than foreign residents.

Series:

Working Paper No. 2005/137

Subject:

Bonds Currencies Discount rates Expenditure Financial institutions Financial services Money Options Public expenditure review

English

Publication Date:

July 1, 2005

ISBN/ISSN:

9781451861563/1018-5941

Stock No:

WPIEA2005137

Pages:

67

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