Recovery Rates From Distressed Debt: Empirical Evidence From Chapter 11 Filings, International Litigation, and Recent Sovereign Debt Restructurings

August 1, 2003

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

On a credit rating-adjusted basis, spreads on U.S. high-yield debt have typically been regarded as a lower bound for emerging market debt. However in the C-rated and defaulted segment, emerging market debt has traded at lower spreads than similarly rated U.S. high yield debt. We show that the lower spreads reflect the fact that the total returns from defaulted debt in the emerging markets have been significantly higher than returns from similarly rated high yield defaulted debt under Chapter 11.

Subject: Asset and liability management, Bonds, Distressed assets, Emerging and frontier financial markets, Financial institutions, Financial markets, Financial sector policy and analysis, Securities markets, Sovereign debt restructuring

Keywords: asset class, Bonds, Chapter 11, debt, debt investor, Distressed assets, Distressed debt, EM debt, Emerging and frontier financial markets, emerging market, Europe, HY debt, HY issue, issue, Securities markets, Sovereign debt restructuring, Sovereign litigation, WP

Pages:
24
Volume:
2003
DOI:
https://doi.org/10.5089/9781451857832.001
Issue:
161
Series:
Working Paper No. 2003/161
Stock No:
WPIEA1612003
ISBN:
9781451857832
ISSN:
1018-5941

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