Sovereign Bond Restructuring : Collective Action Clauses and official Crisis Intervention

Author/Editor:

Kenneth Kletzer

Publication Date:

June 1, 2003

Electronic Access:

Download PDF. 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:

This paper compares the restructuring of sovereign bonds with and without collective action clauses. One conclusion is that collective action clauses can allow efficient debt renegotiation in a formal model of sovereign debt renegotiation while unanimity rules offer incentives for opportunistic behavior by bondholders that leads to inefficient outcomes. With collective action clauses, the mutual gains from renegotiation can be internalized by bondholders so that the holders of each bond issue have incentives to participate in a collective debt restructuring. The analysis abstracts from transactions costs, and the last conclusion might well be sensitive to renegotiation and coordination costs.

Series:

Working Paper No. 03/134

Subject:

English

Publication Date:

June 1, 2003

ISBN/ISSN:

9781451855623/1018-5941

Stock No:

WPIEA1342003

Price:

$15.00 (Academic Rate:$15.00)

Format:

Paper

Pages:

25

Please address any questions about this title to publications@imf.org