## 15. Sovereign Debt Restructurings, 1998-2005: Summary of Haircuts

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### Introduction: scope and main empirical questions
- Examines investor losses (“haircuts”) in sovereign debt restructurings starting with Russia’s 1998 default and including restructurings in Ukraine (1998–99), Pakistan (December 1999 Eurobond exchange), Russia/Ukraine/Ecuador (2000 external exchanges), Argentina (November 2001 “Phase 1”, 2002 “Pesification”, 2005 exchange), Uruguay (May 2003), and others.
- Key questions:
  - How much do investors typically recover in a default situation?
  - Do investor losses vary substantially across restructurings and within exchanges?
  - Were residents treated differently than nonresidents in restructuring terms?
- Main summary result:
  - Average investor losses across restructurings range from 13 percent (Uruguay, 2003) to 73 percent (Argentina, 2005), with most restructurings clustered in the 25-35 percent range.

### Methodology: measuring investor losses (concept and practical issues)
- Definition of haircut (H):
  - H ≡ 1 − NPV_old(r_new) / NPV_new(r_new)
- Rationale:
  - Measures realized, ex post losses using immediate post-exchange (“exit”) yield r_new to discount both old and new payment streams.
  - Captures minimum perceived reduction in value needed to induce acceptance.
- Practical complications and solutions:
  - Absence of observable r_new: estimate using available interest-rate information (e.g., 90 day interbank rates plus sovereign risk premium; swap/forward LIBOR for floating-index instruments).
  - Maturity mismatch: interpolate yields across performing instruments or use closest new-instrument yield and adjust via US treasury yield curve.
  - Currency denomination changes: apply currency-specific exit yields and convert via exchange rate at time of exchange.
  - Upgrades in seniority/security: discounting old cash flows with new yields may overestimate haircuts.
  - Incomplete allocation of multiple new instruments: compute upper and lower bounds assuming best- and worst-case allocations.
  - Indexed coupons tied to market rates: use forward rates from swap/futures markets; where unavailable, project last available rate forward.

### Results: Russia (GKO, MinFin, PRINs/IANs)
- GKO novation (March 1999; Rub 190 billion affected; Rub 80 billion held by foreigners ≈ $12.8 bn at pre-crisis rates; ≈ $3.5 bn at early March 1999 rate):
  - Novation terms: recognized value determined by discounting scheduled payments to August 19, 1998 at 50 percent per annum; package distribution: 3.33 percent cash, 3.33 percent 3-month GKOs, 3.33 percent 6-month GKOs, 20 percent “cash value” OFZs, 70 percent new OFZs (maturities 3–5 years; coupons 30, 25, 20, 15, 10 each year respectively).
  - Constructed ruble discount rates using interbank rate = 45 percent and sovereign risk premium ≈ 35 percent → implied ruble discount rate ≈ 80 percent.
  - Two discount approaches:
    - Upper bound: flat 80 percent discount rate.
    - Lower bound: declining path from 80 percent to about 50 percent by January 2004 (average OFZ discount ≈ 60 percent).
  - GKO exchange haircuts (per 100 principal, non-resident perspective, ignoring repatriation restrictions):
    - Using downward sloping path (shortest OFZ): haircuts range 41.3 percent to 44.8 percent (example entries: 41.3, 42.6, 43.7, 44.4, 44.8, 44.1, 43.3, 42.3).
    - Using constant 79.9 percent (shortest OFZ): haircuts range 51.7 percent to 54.2 percent (example entries: 51.7, 52.8, 53.6, 54.2, 54.6, 54.6, 53.9, 52.5).
  - Including S-account repatriation/withdrawal restrictions (treating postponement/limits as effectively delaying cash by one year) increases haircuts substantially:
    - Shortest OFZ, downward sloping path: 52.8 percent to 55.6 percent (example entries: 52.8, 53.8, 54.7, 55.3, 55.6, 55.0, 54.3, 53.5).
    - Shortest OFZ, constant 79.9 percent: 66.7 percent to 68.8 percent (example entries: 66.7, 67.4, 68.0, 68.4, 68.4, 67.8, 67.8, 67.2).
    - Longest OFZ, downward sloping path: 59.3 percent to 61.7 percent.
    - Longest OFZ, constant 79.9 percent: 73.2 percent to 74.5 percent.
  - Conclusion: depending on discount factors and OFZ obtained, nonresident investor haircuts range between about 50 and 75 percent when withdrawal restrictions are included.

- MinFin III external exchange (February 2000; valuation on February 2, 2000):
  - Present value of outstanding claim computed as 106.2 cents on the dollar.
  - New eight-year US$ bond option valued using performing Russian external bond yield 20.8 percent → Option 1 present value 39.0 → Haircut = 63.2 percent.
  - OFZ option discounted by either fixed 41.4 percent or downward sloping path (avg ≈ 29 percent):
    - OFZ with downward-sloping path present value 62.5 → Haircut = 41.1 percent.
    - OFZ with fixed 41.4 percent present value 48.5 → Haircut = 54.4 percent.
  - Noted puzzle: many investors chose Option 1 despite larger computed haircut; timing and rapidly declining premia narrowed differences.

- PRINs and IANs exchange (February 11 – August 23, 2000; PRINs US$22,231 mn; IANs US$6,847 mn):
  - Present value of cash flow on August 23 (per 100 principal): PRINs 61.2; IANs 65.8.
  - Past due interest (PDI) per 100: PRINs 10.3; IANs 8.4 → PV of PDI: PRINs 9.3; IANs 8.6.
  - Compensation components:
    - Cash payment per $100 of PDI: 9.5 → small value per 100 of principal (1.0 and 0.8).
    - 2010 Eurobond (8.25%): issue price 0.71 → PRINs 6.6; IANs 5.4 from this bond.
    - 2030 Eurobond (step-up): issue price 0.42 → PRINs 26.1; IANs 28.0 from this bond.
    - Total value obtained per 100 principal: PRINs 33.7; IANs 34.1.
  - Haircuts:
    - PRINs haircut = 52.1 percent.
    - IANs haircut = 54.1 percent.
  - Caveat: upgrades in obligor and cross-acceleration clauses imply actual haircuts may be somewhat lower than calculated.

### Results: Ukraine (1998–2000 exchanges; resident vs non-resident treatment)
- August 1998 conversion of T-bills into longer-term hryvnia bonds (3 to 6 years); exchange coefficients based on prevailing T-bill rate ≈ 60 percent.
- Resident treatment:
  - New bonds: 40 percent coupon first year; thereafter floating coupon = future 6-month T-bill yield + 1 percentage point.
  - Haircuts for domestic bondholders at time of exchange very mild: in the order of 5-10 percent (examples: haircuts 8.5 and 5.0 reported for certain issues).
  - Caveat: mild haircuts rely on market T-bill rates used both to set coupons and discount flows; artificially low domestic yields (NBU holdings) could understate true NPV losses.
- Non-resident treatment:
  - Option A: hryvnia bond with 22 percent hedged annual yield (largely ignored).
  - Option B: 2-year zero-coupon dollar Eurobond with yield 20 percent.
  - Holders of certain hedged T-bills received additional cash (20 percent of PV of principal for hedged bills converted at exchange rate 2.94 on September 22, 1998).
  - Non-resident haircuts much larger than residents’, driven by low valuation of new Eurobond against market yields (comparable external bond market yield around 75 percent).
  - Participation: non-residents who agreed exchanged Hrv 1034.4 million out of Hrv 1070 million and mostly chose the Eurobond option.
- Other Ukraine episodes:
  - Chase Manhattan fiduciary loan ($109 million maturing October 20, 1998): 25 percent cash ($27.25 million), remainder amortizing loan at 16.75 percent → resulting haircut ≈ 30 percent.
  - ING Barings / Regent Pacific Group (May–August 1999): final exchange entailed haircut ≈ 38 percent.
  - Comprehensive February–April 2000 external bond exchange (lead manager ING Barings):
    - Offers: two 7-year coupon amortization bonds (Euros 10 percent; US$ 11 percent) with specified amortization schedule.
    - No face value reduction for most bonds; past due interest and accrued interest paid in full and in cash.
    - Present-value losses ranged from about 22 to 35 percent; bond prices rallied from about 59 to about 67 cents on the dollar in the week following the exchange; yields fell from about 28 percent to about 23 percent — recomputing with post-issue prices reduces haircuts by 5-8 percentage points (i.e., to about 18 to 27 percent).
    - Observed pattern: shorter-life bonds suffered larger present-value haircuts than longer-life bonds in this exchange.

### Results: Argentina (Phase 1 November 2001; Pesification February 2002; 2005 exchange)
- Phase 1 exchange (November 2001):
  - 41.7 billion of debt instruments were exchanged, implying a reduction of 2.35 billion in interest and 2.5 billion in amortizations in 2002 alone.
  - Financing needs reduced by US$26.2 billion in the first five years.
  - Valuation challenge: no secondary market for new domestic instruments immediately after the exchange.
  - Two-bound haircut estimation:
    - Upper bound (UB): use yields of old instruments trading post-exchange (November 7, 2001).
    - Lower bound (LB): use yields of post-default debt (September 2002) plus liquidity premium 2.7 percent.
  - Stylized results:
    - Almost all lower bound estimates exceed 25 percent.
    - Most upper bound estimates are below 60 percent.
    - Average Phase 1 haircut ≈ 40 percent.

- Pesification (February 2002):
  - Government converted dollar instruments into pesos at 1.40 pesos per dollar with promised inflation indexing; market rate close to 1.90 pesos/US$ at the time → substantial loss from conversion.
  - Interest rates reduced (most instruments set at 2 percent except longest maturities); maturities unchanged.
  - Some holders returned to original foreign currency bonds: about US$3.65 bn.
  - Creditors holding about US$16.3 bn rejected alternatives and litigated; many loans redollarized by decree August 2003.
  - Valuation approach: dollar instruments discounted using dollar yields; new local-currency flows discounted by indexed peso bond yields; convert NPVs to dollars at 1.9 pesos/US$ for comparison.
  - Pesification haircut results:
    - Unweighted average haircut ≈ 45 percent.
    - Most haircuts in range 30 to 65 percent.
    - Weighted average haircut not computed due to lack of outstanding volumes.

- 2005 External Debt Exchange (January–February 2005; stock targeted ≈ $80 billion):
  - Offer menu (three securities: Par, Discount, Quasi-par) with detailed coupons, maturities, exchange ratios, GDP warrants, and currency conversion option.
  - Participation: 76.15 percent of all holdings → US$35.3 billion restructured:
    - US$15 billion in par bonds.
    - US$11.9 billion in discount bonds.
    - Arg$24.3 billion (≈ US$8.3) in quasi-par bonds.
  - 44 percent of new debt denominated in indexed pesos.
  - Settlement delayed to early June due to litigation; gray “when and if” market enabled use of market prices/yields to compute haircuts.
  - Main haircut findings (Table 11):
    - Average haircuts (weighted by face value of original instruments tendered) 71-75 percent:
      - Par ≈ 71 percent.
      - Discount ≈ 75 percent.
      - Quasi-Par ≈ 73 percent.
    - Haircuts across instruments (except two outliers) ranged between 64 and 82 percent.
    - Outliers:
      - FRAN haircut ≈ 90 percent (driven by extraordinarily high past due interest).
      - Collateralized Discount Brady bond haircut ≈ 38 percent (reflecting absence of past due interest, continued interest payments financed by collateral; cash payment over 45 percent; “total value received” over 60 percent).
  - Cumulative effect for domestic investors who tendered Phase 1 and were later pesified: average cumulative haircut close to 70 percent (multiplicative combination of Phase 1 ~42% and Pesification ~45%).

### Results: Uruguay (April–May 2003 exchange)
- Crisis context: negative output shocks and deposit withdrawals related to Argentina crisis; currency floated June 19, 2002 with 50 percent depreciation.
- Eligible securities: about US$1.6 billion domestic (46 instruments); US$3.5 billion international (18 instruments); one Samurai bond ≈ US$250 million.
- Participation high: ≈ 90 percent for external bonds; 99 percent for domestic bonds.
- Options offered:
  - Maturity extension option (generally 5 years longer).
  - Benchmark bond option (fewer longer-dated, more liquid bonds; maturities 7–30 years).
  - Some small upfront cash payments for accrued interest; two collateralized Brady bonds received PV of principal in cash.
- Valuation approach:
  - Two alternatives:
    - Discount old cash flows using yield of the new instrument actually received (no maturity adjustment).
    - Use maturity-adjusted yield interpolated from available new US$ bond yields with short-end US yield curve correction.
- Main haircut results:
  - External exchange haircuts substantially lower than other cases: range 5-20 percent with few outliers.
  - Weighted average haircut (no maturity adjustment) just under 13 percent.
  - Maturity-adjusted approach: average ≈ 9 percent for extension option and ≈ 5 percent for benchmark option.
  - Domestic results: floating rate bonds haircuts 20-35 percent; short-dated treasury bills 15-30 percent; long-dated fixed-rate domestic bonds and “previsionales” similar to international bonds (relatively mild).

### Cross-case comparison and stylized results
- Wide cross-country variation in NPV haircuts (Hnpv):
  - Uruguay 2003 external ≈ 13 percent (mildest).
  - Argentina 2005 ≈ 74 percent (harshest).
  - Most other restructurings clustered between 25 and 55 percent.
- Market-convention haircuts (Hmkt = 1 - NPV(new)/(outstanding principal + PDI)) tend to overstate losses relative to NPV haircuts, except Argentina 2005 where exit yields were lower than old coupons (so NPV haircuts somewhat higher than market-convention haircuts).
- Residents vs non-residents:
  - No consistent pattern. Residents fared better in some early exchanges (Ukraine OVDP, Russia GKO) but not in Argentina (2001–05) and Uruguay (2003).
  - Resident participation was 98 percent in Argentina 2005 versus non-resident participation 63 percent; overall participation 76.15 percent.
- Within-exchange dispersion:
  - Considerable variation within many exchanges (Argentina, Uruguay, Ecuador, Ukraine), violating strict intercreditor equity.
  - Correlations:
    - Market-convention haircuts typically positively correlated with remaining life of old instruments.
    - Correlation between remaining life and NPV haircuts typically not significant or negative.
  - Brady bonds often fared better than average due to higher cash from release of principal collateral.
- Representative numeric aggregates reported:
  - Phase 1: 41.7 billion exchanged; reduction of 2.35 billion in interest; reduction of 2.5 billion in amortizations (2002); US$26.2 billion financing needs reduced in first five years.
  - Liquidity premium estimated at 2.7 percent (used in LB yield construction).
  - Pesification affected about US$58 bn of dollar-denominated domestic law instruments.
  - 2005 exchange participation 76.15 percent; US$35.3 billion restructured (US$15 bn par; US$11.9 bn discount; Arg$24.3 bn quasi-par ≈ US$8.3 bn); 44 percent of new debt indexed pesos.
  - Uruguay 2003 external weighted average haircut (no maturity adjustment) just under 13 percent; maturity-adjusted averages ≈ 9 percent (extension), ≈ 5 percent (benchmark).
  - Pesification unweighted average haircut ≈ 45 percent; most haircuts 30–65 percent.
  - Argentina 2005 average haircuts (weighted): 71-75 percent (Par ~71%, Discount ~75%, Quasi-Par ~73%); FRAN ≈ 90%; collateralized Discount Brady ≈ 38%.

### Conclusions
- Two main empirical results:
  - NPV haircuts varied substantially across restructurings: Argentina 2005 ≈ 75 percent (harshest); Russia GKO ≈ 50–70 percent; Uruguay 2003 external ≈ 10 percent (mildest); most other cases 25–55 percent.
  - Considerable variation in haircuts within exchanges; treatment by maturity often did not equalize NPV losses.
- Market-convention haircuts generally exaggerate investor losses relative to NPV-based haircuts, with notable exceptions.
- Intercreditor equity is difficult to implement in practice; menus and differentiated treatment by maturity left residual NPV differences.
- Open research questions: determinants of haircut heterogeneity across and within restructurings, including roles of ability/willingness to pay, bargaining dynamics, time since default, and country-level costs of default.

*Italic: Source — IMF Working Paper content unit _wp05137 (sections I–III, Tables 1–4, 5, 6, 9–13, 14–15 and related discussion).*

### References .............................................................................................................

### _wp05137 - References .............................................................................................................

### Text Tables

- 1. Russian GKO Exchange, March 1999 ......................................................................12
- 2. Russian GKO Exchange: Haircuts Suffered by Non-Residents ...............................13
- 3. Russian MinFin Exchange, February 2000...............................................................15
- 4. Russian FRINs and IANs Exchange .........................................................................17
- 5. Ukraine Debt Exchanges, 1998-99 ...........................................................................20
- 6. Ukraine External Debt Exchange, February-April 2000 ..........................................24
- 7. Pakistan Eurobond Exchange (November-December 1999) ....................................26
- 8. Ecuador Exchange, July-August 2000 ......................................................................28
- 9. Argentina “Phase 1” Exchange, November 2001 .....................................................32
- 10. Argentina Pesification (February 2002)....................................................................38
- 11. Argentina’s 2005 Exchange (January-February 2005) .............................................42
- 12. Uruguay Debt Exchange: International Bonds (April-May 2003) ...........................51
- 13. Uruguay Debt Exchange: Domestic Law Bonds (April-May 2003) ........................55
- 14. Sovereign Debt Restructurings, 1998-2005: Summary of Characteristics ...............59

*Source: _wp05137 - References*

### 15.    Sovereign Debt Restructurings, 1998-2005: Summary of Haircuts .........................60

### _wp05137 - 15.    Sovereign Debt Restructurings, 1998-2005: Summary of Haircuts .........................60

### Introduction: scope and main empirical questions
- Examines investor losses (“haircuts”) in sovereign debt restructurings starting with Russia’s 1998 default and including restructurings in Ukraine (1998–99), Pakistan (December 1999 Eurobond exchange), Russia/Ukraine/Ecuador (2000 external exchanges), Argentina (November 2001 “Phase 1”, 2002 “Pesification”, 2005 exchange), Uruguay (May 2003), and others.
- Key questions:
  - How much do investors typically recover in a default situation?
  - Do investor losses vary substantially across restructurings and within exchanges?
  - Were residents treated differently than nonresidents in restructuring terms?
- Main summary result reported:
  - There are substantial differences between average investor losses across debt restructurings, ranging from 13 percent (Uruguay, 2003) to 73 percent (Argentina, 2005), with most restructurings clustered in the 25-35 percent range.
- Observed regularities:
  - Some, but not all, exchanges exhibit substantial within-exchange variation in haircuts by instrument tendered.
  - Generally no systematic harsher treatment of residents relative to nonresident investors (or vice versa) in the sample.

### Methodology: measuring investor losses (concept and practical issues)
- Definition of haircut (H):
  - H ≡ 1 − NPV_old(r_new) / NPV_new(r_new)
  - Investor losses computed as the difference between the net present value (NPV) of the original and the new (restructured) instruments, using the immediate post-exchange (“exit”) yield of the new instrument (r_new) to discount both payment streams.
- Rationale and interpretation:
  - Focuses on realized, ex post losses in the immediate aftermath of a restructuring.
  - This definition measures the minimum perceived reduction in value of holding old instruments (under “equal treatment”) needed to induce acceptance—i.e., a measure of the “toughness” of the exchange and the pressure needed to solve the free-rider problem.
  - Differs from face-value based haircuts (market practice) because it values the old instruments on their original contractual terms rather than assuming acceleration to immediate repayment.
- Practical complications and solutions:
  - Absence of observable r_new (no secondary market): estimate r_new using available interest-rate information (e.g., 90 day interbank rates plus sovereign risk premium; swap/forward LIBOR for floating-index instruments).
  - Maturity mismatch between old and new instruments: interpolate yields across performing instruments trading after the exchange to estimate a comparable yield at the average length of the old instrument; if impossible, use the yield of the new instrument closest in average length and adjust using the US treasury yield curve.
  - Currency denomination changes: apply relevant currency-specific exit yields and convert via exchange rate at the time of exchange.
  - Changes in seniority or security enhancements: discounting old cash flows with new yields may overestimate haircuts when new instruments obtained upgraded seniority or other security enhancements.
  - Incomplete information on allocation of multiple new instruments: compute upper and lower bounds assuming best- and worst-case allocations to each old instrument.
  - Indexed coupons tied to market rates: use forward rates from swap/futures markets (e.g., LIBOR); for local-rate indexing without forward markets, project the last available rate forward.

### Results: Russia (detailed computations and ranges)
- Context: August 18, 1998 devaluation and domestic default on GKOs and OFZs; GKO restructuring (“novation scheme”) finalized in March 1999. About Rub 190 billion affected; about Rub 80 billion held by foreigners (≈ $12.8 bn at pre-crisis exchange rates; ≈ $3.5 bn at early March 1999 exchange rate).
- Novation scheme terms (summary of package components):
  - Scheduled payments discounted to August 19, 1998 at a rate of 50 percent per annum to determine “recognized value”.
  - Package included: 3.33 percent of adjusted nominal value in cash; 3.33 percent in 3-month GKOs; 3.33 percent in 6-month GKOs; 20 percent in “cash value” OFZs (usable to pay tax arrears or purchase selected bank shares); remaining 70 percent exchanged for new OFZs with maturities 3–5 years and coupons of 30, 25, 20, 15 and 10 each year (respectively).
  - Cash proceeds had to be deposited in restricted ruble “S-accounts”; withdrawal/repatriation required one-year placement in a non-interest bearing “transit account” (or alternative auction with more depreciated repatriation rate).
- Valuation challenge: domestic secondary market wiped out; no observable exit yields for new instruments.
  - Constructed ruble discount rates using: 90 day interbank rate (reflecting inflation expectations) plus a sovereign default risk premium (difference between March 2004 9 percent Eurobond yield and US Treasuries).
  - March 1999 figures used: interbank rate = 45 percent; risk premium ≈ 35 percent → implied ruble discount rate ≈ 80 percent.
  - Two discount approaches used:
    - Upper bound: flat 80 percent discount rate for ruble instruments.
    - Lower bound: declining path beginning at 80 percent and declining to about 50 percent by January 2004 (average OFZ discount rate ≈ 60 percent using declining path).
- GKO exchange haircut results (per Table 1; per 100 units of principal; non-resident perspective, ignoring repatriation restrictions):
  - Present-value based haircuts using the downward sloping discount path (choosing shortest OFZ):
    - Haircuts range by GKO maturity from 41.3 percent to 44.8 percent (example entries: 41.3, 42.6, 43.7, 44.4, 44.8, 44.1, 43.3, 42.3).
  - Using constant discount rate of 79.9 percent (choosing shortest OFZ):
    - Haircuts range from 51.7 percent to 54.2 percent (example entries: 51.7, 52.8, 53.6, 54.2, 54.6, 54.6, 53.9, 52.5).
  - Choosing longest OFZ increases haircuts by about 9 percentage points under the downward sloping path and similar magnitudes under fixed-rate assumption.
- Effect of S-account repatriation/withdrawal restrictions:
  - Treating transit/repayment restrictions as effectively postponing cash receipts by one year (and/or converting to risk-free zero-coupon par bond when nonparticipants were repaid but funds were subject to 5-year repatriation restriction) increases implied haircuts.
  - Table 2 (including repatriation restrictions) yields higher haircuts:
    - Shortest OFZ, downward sloping path: haircuts 52.8 percent to 55.6 percent (example entries: 52.8, 53.8, 54.7, 55.3, 55.6, 55.0, 54.3, 53.5).
    - Shortest OFZ, constant 79.9 percent: haircuts 66.7 percent to 68.8 percent (example entries: 66.7, 67.4, 68.0, 68.4, 68.4, 67.8, 67.8, 67.2).
    - Longest OFZ, downward sloping path: haircuts 59.3 percent to 61.7 percent.
    - Longest OFZ, constant 79.9 percent: haircuts 73.2 percent to 74.5 percent.
  - Conclusion for GKO exchange:
    - Investors (particularly nonresidents) faced very large haircuts: depending on discount factors and OFZ obtained, between about 50 and 75 percent when taking withdrawal restrictions into account.
    - These estimates are lower than some contemporary market commentary claiming losses as high as 95 percent, which likely conflated exchange losses with earlier devaluation and currency-crisis losses.
- MinFin III external exchange (May 1999 default; open-ended exchange announced November 1999, modified January 2000):
  - Options offered: (1) new eight-year US dollar bond with 3 percent coupon (maturity 11/14/2007), or (2) four-year OFZ (ruble) paying 15 percent in the first year and 10 percent thereafter (maturity 11/19/2003); US dollar face converted to rubles at exchange rate 26.2 RUB per USD.
  - Valuation assumptions:
    - Present value of outstanding claim on February 2, 2000 computed as 106.2 cents on the dollar (using US Treasury bill compounding).
    - New eight-year bond valued using performing Russian external bond yield in early February 2000 (20.8 percent).
    - OFZ option discounted by either fixed discount rate of 41.4 percent (external default premium + 90-day interbank) or a downward sloping path starting at 41.4 percent and falling to 28 percent by November 2003 (average ≈ 29 percent).
  - Haircut results (Table 3):
    - Option 1 (new $ MinFin): present value 39.0 → Haircut = 63.2 percent.
    - Option 2 (OFZ): present value 62.5 using downward-sloping path → Haircut = 41.1 percent.
    - Option 2 using fixed 41.4 percent → present value 48.5 → Haircut = 54.4 percent.
    - Noted puzzle: most investors reportedly opted for Option 1 despite its larger immediate computed haircut—timing of exchange (many exchanged later in 2000) and rapidly declining inflation expectations/default premia narrowed haircut differential.
- PRINs and IANs external exchange (February 11 – August 23, 2000):
  - Aggregate: PRINs outstanding US$ 22,231 mn; IANs US$ 6,847 mn.
  - Old instruments characteristics:
    - PRINs maturity 12/15/2020; average life 10.92 years; coupon libor + 13/16.
    - IANs maturity 12/15/2015; average life 9.05 years; coupon libor + 13/16.
    - Present value of cash flow on August 23 (per 100 of principal): PRINs 61.2; IANs 65.8 (discount rates used 16.4 and 16.2 percent respectively).
    - Past due interest (PDI) per 100 principal: PRINs 10.3; IANs 8.4 → PV of PDI per 100: PRINs 9.3; IANs 8.6 (compound rates 4.5 and 5.0 percent).
    - Present value of cash flow plus PDI: PRINs 70.4; IANs 74.4.
  - New instruments and compensation:
    - Cash payment per $100 of PDI: 9.5 for both PRINs and IANs → value obtained per 100 of principal small (1.0 and 0.8).
    - 2010 Eurobond (8.25 percent coupon) issued against PDI: price on issue date 0.71 → value obtained per 100 principal: PRINs 6.6; IANs 5.4 → total compensation for PDI per 100: PRINs 7.6; IANs 6.2.
    - 2030 Eurobond (2.25–7.5 percent step-up coupon) issued for principal after face value reduction (PRINs 37.5; IANs 33.0):
      - Price on issue 0.42 → value obtained per 100: PRINs 26.1; IANs 28.0.
    - Total value obtained per 100 of principal: PRINs 33.7; IANs 34.1.
  - Haircut outcomes (Table 4):
    - PRINs haircut = 52.1 percent.
    - IANs haircut = 54.1 percent.
  - Caveat: new instruments included upgrades in obligor (Russian Federation vs Vneshekonombank) and expanded cross-acceleration clauses → ignoring such upgrades may somewhat overestimate haircuts.

### Results: Ukraine (overview of restructurings started in 1998)
- Ukraine experienced rollover problems after the Russian crisis reduced demand for Ukrainian issuance.
- In late August 1998 the Ukrainian government negotiated debt exchanges with three creditor groups:
  - Domestic commercial banks holding treasury bills (OVDPs).
  - Non-resident holders of treasury bills.
  - Holders of a loan placed through Chase Manhattan in October 1997.
- The paper begins description of conversion schemes for treasury bills owned by domestic banks (OVDPs) announced August 1998; (detailed haircut computations and outcomes follow in the full section).

*Source: _wp05137 - 15. Sovereign Debt Restructurings, 1998-2005: Summary of Haircuts (sections I–III, including Tables 1–4 as presented in the source content).*

### 26. It offered to exchange T-bills into longer term hryvnia denominated bonds of 3 to 6 years

### _wp05137 - 26. It offered to exchange T-bills into longer term hryvnia denominated bonds of 3 to 6 years

### Exchange offer design and key terms
- Offered exchange: T-bills into longer term hryvnia denominated bonds of 3 to 6 years maturity.
- Exchange coefficients: determined in line with the present value of the T-bills at the time of the exchange, discounted at the prevailing T-bill rate of about 60 percent.
- Treatment by issue date:
  - T-bills that had just matured at the time of the exchange received new principal one-for-one.
  - T-bills issued before the exchange and coming due in July or August of 1999 received a face value haircut of 65.57 percent.
- Coupon on new bonds:
  - 40 percent for the first year.
  - Floating coupon equal to the future 6-month T-bill yield plus 1 percentage point for the remainder of the period.
- Participation: commercial banks eventually agreed to exchange about Hrv 800 million, or about one third of their portfolio.

### Resident versus non-resident treatment and incentives
- Residents:
  - Received long OVDP (3-6 year Hryvnia bond, 40 percent followed by floating coupon).
  - Main result: haircuts for domestic bondholders at the time of the exchange were very mild, in the order of 5-10 percent.
  - Reason: government forced an interest rate reduction during the first year (40 percent), but promised the market rate thereafter (floating T-bill indexed +1 percentage point).
  - Caveat: mild haircut relies on using market T-bill rates both to set coupons and to discount future cash flows; if domestic T-bill yields were expected to understate default risk (e.g., due to capital controls or NBU purchases), haircuts would be larger.
  - IMF note: about two-thirds of the T-Bill stock of about Hrv. 9 billion issued in 1998 was owned by the NBU; reported T-bill issue rates at the time were about 60 percent, lower than the secondary market yield of the DM-denominated bond.
- Non-residents:
  - Option A: hryvnia denominated bond with a 22 percent hedged annual yield (market largely ignored this option).
  - Option B: 2 year zero-coupon dollar-denominated Eurobond with a yield of 20 percent.
  - Holders of certain hedged T-bills (9 and 12 month T-bills issued to nonresidents in December 1997 through Merrill Lynch) additionally received 20 percent of the present value of their principal in cash Hryvnia, exchanged into dollars at market exchange rate of 2.94 on September 22, 1998.
  - Non-resident haircuts were much larger than residents’ haircuts, driven by low value of the new Eurobond relative to market yields (market yield around 75 percent for comparable external bond).
  - Capital controls concern: non-residents worried about capital controls under discussion; benefit of avoiding controls not captured in haircut calculations.
  - Participation: almost all non-residents that agreed to the exchange—holding Hrv 1034.4 million out of a total restructured amount of Hrv 1070 million—chose the Eurobond option rather than the local currency alternative.

### Table 5 illustrative computations and numerical outcomes (selected values)
- Resident OVDP (examples from Table 5):
  - Present value at exchange (per 100 of principal) for just issued vs matured: 100.0 and 63.1 (examples).
  - Value (per unit of principal of new bond): 0.91 (discount rate used 60.0).
  - Units obtained (per 100 of old principal): 100.00 and 65.57.
  - Total value obtained (per 100 units of principal): 91.46 and 59.97.
  - Haircuts (in percent): 8.5 and 5.0.
- Non-resident Merrill Lynch Eurobond (examples from Table 5):
  - Value (per unit of principal of new bond): 0.47.
  - Units obtained (per 100 of old principal): 100.0, 65.6, 80.0, 71.1, 75.0 (various columns).
  - Cash obtained (per 100 of old principal) for hedged bills: 20.0 and 17.8 and 25.0 and 20.0 (various cases).
  - Total value obtained (per 100 units of principal): 47.49, 31.14, 57.99, 51.56, 69.34, 61.98 (selected columns).
  - Haircuts (in percent): 52.5, 38.4, 57.6, 54.9, 30.7, 38.0 (selected columns).
- Key arithmetic notes:
  - Because the new bonds paid 40 percent in the first year then floated at T-bill+1 percentage point, discount and coupon rates approximately cancel after the first year; haircuts for restructured T-bills with maturity close to one year are very insensitive to assumed discount rate.
  - In one column a discount rate of over 112 percent was used (derived as 74 percent foreign-currency yield plus 38 percent expected depreciation), implying a present value of the old instrument of about 50 per 100 units of principal and a haircut of just under 40 percent.

### Other restructurings and outcomes (selected episodes)
- Chase Manhattan fiduciary loan ($109 million maturing October 20, 1998):
  - Holders received a 25 percent ($27.25 million) cash payment; remainder restructured into an amortizing loan with dollar interest rate 16.75 percent, quarterly installments starting in 1999.
  - Principal payment limited to $2 million per quarter during the first year; balance paid in four equal installments in 2000.
  - Resulting haircut was around 30 percent.
- ING Barings / Regent Pacific Group episode (May–August 1999):
  - Offer: 20 percent repaid on time, remainder swapped for a new international bond with three year maturity.
  - Final agreement (July 15): 20 percent repaid in cash, remainder exchanged for DM bonds at a rate of 94.3 cents of new debt for each dollar of old debt; new DM bonds coupon 16 percent, additional issue of existing DM 1 billion international bond due Feb 2001.
  - Resulting exchange entailed a haircut of about 38 percent.
- Comprehensive February–April 2000 external bond exchange (lead manager ING Barings):
  - Covered all outstanding commercial bonds including two pre-August Eurobonds, the Chase Manhattan loan, remaining Merrill Lynch Eurobond, and about $1 billion of Gazprom bonds.
  - Offer: two 7-year coupon amortization bonds (Euros at 10 percent coupon; U.S. dollars at 11 percent coupon), under English law; amortization schedule: 3 percent at each amortization date in 2001, 5 percent in 2002, and 9.33 percent at each date between 2003 and 2007.
  - No face value reduction except: zero coupon Merrill Lynch Eurobond ~5 percent, Gazprom bonds between 0 and 33 percent depending on maturity.
  - Past due interest and accrued interest paid in full and in cash.
  - Minimum participation threshold: 85 percent among holders of bonds maturing in 2000–01; actual participation: almost full.
  - Table 6 selected results (per 100 of principal):
    - Present value of cash flow on 2/4/2000 (per 100 principal) examples: 112.47, 73.68, 84.89, 0.46, 63.8 (various old instruments).
    - Discount rate used (in percent) examples: 27.6, 27.9, 28.1, 28.3, 29.5.
    - Price on issue date of 2007 11 percent US$-denominated Eurobond (per unit of new principal): 0.59.
    - Units obtained (per 100 of principal) examples: 100, 100, 94.6, 100, 81.9.
    - Value obtained (per 100 of principal) examples: 58.9, 58.9, 55.7, 58.9, 48.2.
    - Total value obtained (per 100 of principal) examples: 73.5, 65.6, 25.5, 97.5, 149.97 (Table shows a range across instruments).
    - Haircut based on choice of US$ bond (in percent) examples: 34.6, 33.4, 34.3, 28.9, 21.7.
  - Main takeaway: present value losses ranged from about 22 to 35 percent, a fairly mild restructuring compared to earlier 1998 non-resident OVDP haircuts and to contemporaneous Russian restructuring. Bond prices rallied from about 59 to about 67 cents on the dollar in the week following the exchange; yields fell from about 28 percent to about 23 percent—if recomputed using these prices and yields, haircuts would be 5-8 percentage points lower (i.e., about 18 to 27 percent).
  - Observed pattern: shorter-life bonds suffered larger present-value haircuts than longer-life bonds in this exchange.

### Interpretations and implications
- The resident exchange structure (40 percent first-year coupon, then floating at market T-bill+1 percentage point) effectively deferred and extended maturities and minimized immediate nominal haircuts for domestic holders, but relied on market-consistent domestic T-bill yields for valuation; artificially low domestic yields (e.g., due to NBU purchases) can mask true NPV losses.
- Non-residents faced larger NPV losses because alternatives offered (notably the 20 percent zero-coupon Eurobond) were valued much lower against foreign-currency market yields (around 74–76 percent observed for comparable DM bond), and expected currency depreciation further amplified discount rates.
- Hedged instruments that provided minimum dollar returns and partial cash payments delivered higher total values, but contractual entitlements and higher reported haircuts could diverge because of the interplay of higher contractual dollar returns and valuation at prevailing exchange rates.
- Subsequent comprehensive exchanges (February–April 2000) produced milder NPV losses (about 22–35 percent) and benefited from positive price/yield reactions immediately after issuance, reducing effective haircuts when recalculated at post-issue market prices.

*Italic: Source — content extracted from the provided IMF PDF chapter _wp05137 (sections on Ukraine debt exchanges, Table 5 and related discussion).*

### 41.7 billion of debt instruments were exchanged, implying a reduction of 2.35 billion in

### _wp05137 - 41.7 billion of debt instruments were exchanged, implying a reduction of 2.35 billion in

### Phase 1 exchange: methodology and haircut bounds
- 41.7 billion of debt instruments were exchanged, implying a reduction of 2.35 billion in interest and 2.5 billion in amortizations in 2002 alone. Financing needs were reduced by US$26.2 billion in the first five years.
- Unique challenges:
  - Very large number of old and new instruments relative to previous exchanges.
  - No secondary market for the new domestic instruments immediately after the exchange; therefore the usual methodology—discounting both new and old payment streams with the maturity-adjusted “exit yield”—cannot be applied.
- Two-bound approach to estimate exit yield and haircuts:
  - Upper bound (UB):
    - Use yields of old instruments trading post-exchange (November 7, 2001) to estimate an upper bound for the haircut.
    - Assumption: yield of old instrument would have exceeded yield of new instruments because government declared new instruments effectively senior.
    - Differences in maturity handled by discounting new guaranteed loans by yields on the old bond with the closest average life, adjusted by the US T-bill yield curve when necessary.
  - Lower bound (LB):
    - Use yields of post-default debt (September 2002) to estimate yields for Phase 1 instruments.
    - Compute liquidity premium by comparing Boden 07 (indexed pesos) and a guaranteed loan of similar average life; liquidity premium estimated at 2.7 percent.
    - Add 2.7 percent liquidity premium to yields of post-default dollar-denominated instruments (e.g., Boden 2012 which started trading in September 2002), with small yield curve adjustments using the US T-bill yield curve when appropriate.
    - Note: observed yields by September 2002 likely understate what yields would have been in November 2001 due to resolved legal/political uncertainty and recovery.
- Floating-rate bond complication:
  - Forward rates available for LIBOR but not for some local-indexed bonds; for those, actual payments up to May 2005 were used and held frozen thereafter.
  - Exception: FRAN (indexed to yield of Argentine debt) was valued at par at exchange time.
- Table 9 summary statements:
  - Calculations use maturity-adjusted yields derived from either November 2001 yields on old externally issued instruments (UB) or yields on post-default debt plus liquidity premium (LB).
  - Argentina had remained current until the exchange: there was no PDI or past due principal, and there were no cash payments associated with the exchange.
- Stylized haircut results for Phase 1 (Option 1 generally most favorable):
  - Almost all lower bound estimates exceed 25 percent.
  - Most upper bound estimates are below 60 percent.
  - The average haircut is about 40 percent (comparison with other exchanges: somewhat higher than Ecuador, Ukraine, and Pakistan; below Russia’s creditors in 1999 and 2000).

### Pesification (February 2002): conversion and effects
- Context and measures:
  - Bank run → deposit freeze → political turmoil → fall of government → default on all public debt → devaluation.
  - February 2002: government “pesified” the guaranteed loans issued in November 2001 and other dollar-denominated domestic law instruments (about US$58 bn in total).
  - Conversion terms: dollar instruments converted at 1.40 pesos per dollar, with promise to index capital and interest payments by inflation.
  - At the time the peso/dollar exchange rate was close to 1.90, implying a substantial loss from conversion.
  - Interest rates were further reduced for most instruments; all, except those with the longest maturity, were set at 2 percent. Maturities left unchanged.
- Options and outcomes:
  - No formal exchange; terms changed by fiat. Investors could opt to return to the defaulted foreign currency bond they had exchanged in Phase 1.
  - Estimated choices:
    - Holders of about US$3.65 bn “pesified loans” used the option to return to original foreign currency bonds.
    - Creditors holding about US$16.3 bn pesified loans—mostly pension funds—rejected both alternatives and pursued legal action; their loans were eventually “redollarized” by decree in August of 2003.
- Valuation approach (Table 10):
  - Original dollar-denominated instruments discounted using dollar-denominated yields at the time.
  - New local currency cash flows discounted by yields on indexed peso bonds (Boden series yields used).
  - Guaranteed loans discounted at slightly higher yield reflecting liquidity premium.
  - Peso NPVs converted to dollars using exchange rate of 1.9 pesos/US$ for comparison.
- Pesification haircut results:
  - Unweighted average haircut was about 45 percent.
  - Most haircuts in range of 30 to 65 percent.
  - Weighted average haircut could not be computed due to lack of information on outstanding volumes of various guaranteed loans.

### The 2005 External Debt Exchange (January–February 2005)
- Stock targeted: about $80 billion of unrestructured international debt issued prior to default, held mostly by non-residents and some residents that had not tendered in Phase 1.
- Offer design (Buenos Aires proposal / SEC filing September 2004):
  - Menu of three securities:
    - Par bond: no face value reduction; maturity 35 years; step-up coupons (dollar example: 1.33% first five years, 2.5% next ten, 3.75% following ten, 5.25% thereafter; indexed peso bond rates: 0.63, 1.18, 1.77, 2.48 percent); amortization in 19 half-year installments starting September 2029.
    - Discount bond: exchanged at 33.7 percent of original face value; maturity 30 years; constant interest 8.28% in dollars (5.83% in indexed pesos) with part capitalized first 10 years; amortized in 20 equal payments beginning June 2024.
    - Quasi-par bond: maturity 42 years; exchanged at 69.6 percent of face value; interest rate 3.31% capitalizing during first 10 years; amortized in 20 semiannual payments starting 2036; issued in indexed pesos only, targeted to local pension funds; minimum bid US$350,000 for quasi-par; par bond max US$50,000 per holder to push larger holders to discount bond.
  - All instruments included detachable “GDP warrant” with payments tied to GDP growth.
  - Currency conversion option: owners could change holdings to indexed pesos bonds at exchange rate prevailing on December 31, 2003; unpaid and accrued interest through December 31, 2001 included; unpaid interest between December 2001 and December 2003 was not recognized.
- Participation and aggregate outcome:
  - Offer opened January 12, 2005 and closed February 25, 2005.
  - Participation was 76.15 percent of all holdings, resulting in US$35.3 billion restructured debt:
    - US$15 billion in par bonds.
    - US$11.9 billion in discount bonds.
    - Arg$24.3 billion (about US$8.3) in quasi-par bonds.
  - 44 percent of the new debt was denominated in indexed pesos.
  - Settlement delayed until early June due to litigation; a gray “when and if” market began trading after preliminary results announced March 3, 2005, enabling use of market prices/yields to compute haircuts.
- Main haircut findings (Table 11; 66 US$ and Arg$ instruments analyzed):
  - Average haircuts (weighted by face value of original instruments tendered) were 71-75 percent:
    - Around 71 percent for the Par.
    - 75 percent for the Discount.
    - 73 percent for the Quasi-Par.
  - Haircuts across instruments (except two outliers) ranged between 64 and 82 percent.
  - Outliers:
    - FRAN: haircut close to 90 percent (driven by extraordinarily high past due interest on this bond because coupon linked to yields on other Argentine sovereign bonds).
    - Collateralized Discount Brady bond: haircut around 38 percent (reflecting absence of past due interest, continued interest payments financed by interest collateral, release of principal collateral upon exchange; cash payment over 45 percent of principal outstanding; “total value received” over 60 percent).
  - Remarks:
    - These are the highest haircuts of any single exchange studied.
    - High haircuts occurred despite secondary market yields being extraordinarily low (only 7-9 percent), because low yields reduced the value of maturity extensions.
    - Domestic investors who tendered in Phase 1 and were later pesified faced an average cumulative haircut close to 70 percent (multiplicative combination of Phase 1 ~42% and Pesification ~45%).

### Uruguay 2003 exchange: design and haircut profile
- Crisis context: negative output shocks and deposit withdrawals related to Argentina crisis; banking pressures in 2002; currency floated June 19, 2002; 50 percent depreciation; doubts about public debt service.
- Exchange targets and participation:
  - Eligible securities: about US$1.6 billion domestically issued bonds and T-bills (46 instruments); US$3.5 billion international bonds (18 instruments); one Samurai bond ~US$250 million.
  - Offer launched April 10, 2003; settlement May 29, 2003.
  - Participation high: about 90 percent for externally issued bonds and 99 percent for domestic bonds.
  - Use of exit consents and regulatory incentives increased acceptance.
- Options offered:
  - Two principal options for most bondholders:
    1. Maturity extension option: exchange for another bond with similar coupon and extended maturity (generally 5 years longer), sometimes mixed with 30-year bond capitalizing part of interest over first four years.
    2. Benchmark bond option: receive one of a smaller number of longer-dated but more liquid benchmark bonds (3 external, 4 domestic) with maturities 7–30 years; some step-up coupons.
  - Some bondholders received small upfront cash payments to compensate accrued interest; holders of two collateralized Brady bonds received present value of principal in cash.
- Valuation and haircut computation approach (Table 12 and Table 13):
  - Two alternative haircut computations:
    - Using yield of the new instrument actually received to discount old cash flows (no maturity adjustment).
    - Using a yield corresponding to remaining life of old instrument interpolated from available yields of new US$ bonds with a maturity correction based on US yield curve at short end (maturity adjustment).
  - For some new bonds, secondary market prices were not available; in those cases present value of new bond discounted by maturity-adjusted yield of other new US$ bonds was used.
- Main haircut results:
  - Haircuts for Uruguay external exchange substantially lower than other exchanges: range of 5-20 percent with few outliers.
  - Weighted average haircut (no maturity adjustment) just under 13 percent.
  - Alternative approach (present value (3) with maturity adjustment) yields lower averages: ~9 percent for extension option and ~5 percent for benchmark option.
  - For domestic (46 bonds) results:
    - Floating rate bonds: haircuts in 20-35 percent range.
    - Short-dated treasury bills: haircuts in 15-30 percent range.
    - Long-dated fixed rate domestic bonds and “previsionales”: haircuts similar to international bonds (relatively mild).
  - The downward-sloping post-exchange Uruguay yield curve caused maturity adjustments to lower measured haircuts because longer-dated new instruments had higher value when discounted.

### Cross-case comparison and stylized results (Tables 14–15)
- Wide cross-country variation in average NPV haircuts (Hnpv):
  - Uruguay 2003 external exchange: about 13 percent (mildest).
  - Argentina 2005 exchange: about 74 percent (harshest).
  - Most other restructurings clustered between 25 and 55 percent.
- Conventional market-definition haircuts (Hmkt = 1 - NPV(new)/(outstanding principal + PDI)) tend to overstate losses relative to NPV haircuts used in this paper (which compare NPV(new) to NPV(old) evaluated at post-exchange yields), with one notable exception:
  - Argentina 2005: post-exchange yields were lower than coupon rates of many old instruments, so present value of old instruments (at exit yields) exceeded face value; in this case NPV haircuts are somewhat higher than market-convention haircuts.
- Treatment of residents vs non-residents:
  - No consistent pattern across cases.
  - Residents fared better in some early exchanges (Ukraine OVDP, Russia GKO), but not in Argentina (2001–05) and Uruguay (2003).
  - Domestic residents in Argentina underwent two restructurings (Phase 1 November 2001 and Pesification February 2002) with average cumulative haircut close to 70 percent—almost as high as 2005 exchange haircuts on external creditors.
- Within-exchange dispersion:
  - Considerable variation in haircuts within many exchanges (Argentina, Uruguay, Ecuador, Ukraine), violating strict intercreditor equity.
  - Correlations:
    - Haircuts measured by market convention (face-value basis) typically positively correlated with remaining life of old instruments (holders of longer-dated old instruments tended to receive larger face-value cuts).
    - Correlation between remaining life and NPV haircuts is typically not significant or is negative: holders of longer instruments often had smaller NPV haircuts because old long-dated instruments already had lower NPV at high post-exchange yields.
  - Brady bonds often fared better than average both in value received and in haircut metrics (Argentina, Uruguay, Ecuador), driven by higher cash received from release of principal collateral.
- Participation and holdouts:
  - Most exchanges achieved participation rates around or above 90 percent (Table 14).
  - Exceptions: Argentina pesification and 2005 exchange had lower participation (pesification participation among all eligible counted lower due to pension fund resistance; 2005 overall participation 76.15 percent driven by lower non-resident participation of 63 percent; resident participation was 98 percent).
- Representative numeric aggregates and comparisons (as reported):
  - Phase 1: 41.7 billion exchanged; reduction of 2.35 billion in interest; reduction of 2.5 billion in amortizations (2002); US$26.2 billion financing needs reduced in first five years.
  - Liquidity premium estimated at 2.7 percent (used in LB yield construction).
  - Pesification affected about US$58 bn of dollar-denominated domestic law instruments.
  - Holders of about US$3.65 bn pesified loans opted to return to original instrument; about US$16.3 bn rejected and litigated (later redollarized Aug 2003).
  - 2005 exchange participation: 76.15 percent; US$35.3 billion restructured (US$15 bn par; US$11.9 bn discount; Arg$24.3 bn quasi-par ≈ US$8.3 bn); 44 percent of new debt indexed pesos.
  - Argentina 2005 average haircuts (weighted): 71-75 percent (Par ~71%, Discount ~75%, Quasi-Par ~73%); two outliers: FRAN ≈ 90% haircut; collateralized Discount Brady ≈ 38% haircut.
  - Uruguay 2003 external weighted average haircut (no maturity adjustment): just under 13 percent; maturity-adjusted approach weighted average ≈ 9 percent (extension), ≈ 5 percent (benchmark).
  - Pesification unweighted average haircut ≈ 45 percent; most haircuts 30–65 percent.
  - Average Phase 1 haircut ≈ 40 percent.
- Interpretation and implications:
  - Cross-exchange differences in haircuts primarily reflect countries’ ability to pay, willingness to pay, and bargaining power; timing and market conditions matter (e.g., Argentina 2005 benefited from favorable external financing environment and low exit yields).
  - Within-exchange differences challenge notions of intercreditor equity; attempts to differentiate treatment by instrument maturity often did not offset pre-exchange present-value differences, leaving substantial variation in NPV haircuts.
  - Market-convention haircuts (face-value based) generally exaggerate investor losses relative to NPV-based haircuts.

### Conclusions
- Two main empirical results:
  - NPV haircuts (NPV(new) compared with NPV(old) at post-exchange yields) varied substantially across restructurings: Argentina 2005 ~75% (harshest); Russia GKO ~50–70%; Uruguay 2003 external ~10% (mildest); most other cases 25–55%.
  - Considerable variation in haircuts within exchanges; in some restructurings holders of longer-dated instruments suffered smaller NPV losses, in other restructurings no clear pattern.
- Market-convention haircuts (comparison to face value) tend to exaggerate losses except in rare cases (Argentina 2005) where exit yields were lower than old coupons.
- Intercreditor equity is difficult to implement in practice: menus and differentiated treatment by maturity often left residual differences in NPV losses.
- The documented facts raise further research questions on determinants of haircut heterogeneity across and within restructurings, including roles of ability/willingness to pay, bargaining dynamics (e.g., time since default), and country-level costs of default.

*Italicized source: IMF Working Paper (content unit: _wp05137 - 41.7 billion of debt instruments were exchanged, implying a reduction of 2.35 billion in).*

### References

### _wp05137 - References

### Reference list
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* _wp05137 - References*

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_Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2005/_wp05137.pdf_