Haircuts: Estimating Investor Losses in Sovereign Debt Restructurings, 1998-2005
July 1, 2005
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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.
Subject: Bonds, Currencies, Discount rates, Expenditure, Financial institutions, Financial services, Money, Options, Public expenditure review
Keywords: Bonds, Brady bond, cash payment, coupon bond, Currencies, Debt Restructuring, Defaults, discount rate, Discount rates, Financial Crises, Global, maturity date, Options, par bond, Public expenditure review, secondary market, Sovereign Debt, U.S. dollar, WP, yield to maturity
Pages:
67
Volume:
2005
DOI:
Issue:
137
Series:
Working Paper No. 2005/137
Stock No:
WPIEA2005137
ISBN:
9781451861563
ISSN:
1018-5941
