How to order
IMF Publications

Working Papers in full text
2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 All


Other research-related activities and publications of the IMF can be found at IMF Research

Free Email Notification

Receive emails when we post new items of interest to you.

Subscribe or Modify your profile



Japan's Distressed Debt Market

Author/Editor: Ohashi, Kazunari | Singh, Manmohan
Authorized for Distribution: May 1, 2004
Electronic Access: Free Full Text (PDF file size is 359KB)
Use the free Adobe Acrobat Reader to view this PDF file.
 
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: Sizable risk capital from outside may be necessary to accelerate Japan's corporate restructuring to replace the stock of impaired bank loans. To attract risk capital, impaired loans must find market-clearing prices. However, the asymmetry in the bid-ask prices faced by banks and distressed-debt investors continues to stall efforts to create a liquid distressed-debt market. This paper asserts that the wedge between the prices faced by different participants is primarily a result of different valuation methods employed by banks and distressed-debt investors. On the one hand, banks do not recognize "maturity default" that results in banks rolling over impaired-loan accounts, effectively turning them into perpetual debt, which is expected to capture any upside potential for value. On the other hand, distressed-debt investors presently view their investments as equity stakes that require improved cash flows, unlike the buy-and-sell distressed-collateral market that existed in the mid-1990s. We suggest that bids from distressed-debt investors may not be as low as they are deemed by local banks and the asymmetry in prices may be reduced if banks value their claims as corporate equity.
 
Order a print copy
Series: Working Paper No. 04/86
Subject(s): Debt | Japan | Emerging markets | Debt restructuring
Author's keyword(s): Non-performing loans | sub-performing loans | distressed debt investors | vulture funds
 
English  
    Published:   May 1, 2004        
    ISBN/ISSN:   1934-7073   Format:   Paper
    Stock No:   WPIEA0862004   Pages:   29
    Price:   US$15.00 (Academic Rate: US$15.00 )
       
     
Please address any questions about this title to publications@imf.org.