A New Deal for Debt Overhangs?

A New Approach to Eurozone Sovereign Debt

Can we engineer new debt contracts for countries like Argentina?

The new non concessional debt more than offset the debt relief received, although export earnings have increased since 2001.

Figure 2 shows the breakdown between new (net) transfers and debt forgiveness.

Some countries achieved a real exit from a debt crisis, while others continued to face a lingering debt problem or are considering new debt renegotiations (as in the case of Ecuador).

The first phases of that treatment, from 1982 to 1988, relied on debt reschedulings and new liquidity support, together with a market menu of options, which allowed limited amounts of voluntary debt reductions through debt securitization at a discount, debt equity swaps and debt buy backs.

For countries that have reached the completion point, the challenge is to achieve lasting debt sustainability and avoid falling into a new debt trap.

Under Chapter 11, companies with a solid underlying business generally swap debt for equity. Old equity holders are wiped out and old debt claims are transformed into equity claims in the new entity which continues operating with a new capital structure. Alternatively, the debt holders can agree to reduce the face value of debt, in exchange for some warrants.

So we could say, well, a new figure comes out ... let's see African debt.

New repayment modalities must therefore be put in place to reduce the debt burden.

It is time to rethink the problem and to devise new financial mechanisms to resolve the debt problem that do not lead to debt accumulation.

The amount of debt relief would then be determined on the basis of expected development assistance and the need to avoid a new debt overhang.

External deficits were usually covered through new resource inflows and by allowing debt arrears to accumulate.

New and innovative funding mechanisms are also required, such as debt swaps and increased opportunities for microfinance.

The new initiative would help to make progress towards resolving the external debt crisis of developing countries.

Paragraph 18.17 In subparagraph (a), insert the words debt management after the (new paragraph 18.18) words finance .

The US experienced debt crises periodically during the nineteenth century, and again during the Great Depression. Its response was to offer targeted and expedited debt relief often by bringing in new temporary bankruptcy legislation that forced limited debt write downs.

ATHENS The point of restructuring debt is to reduce the volume of new loans needed to salvage an insolvent entity. Creditors offer debt relief to get more value back and to extend as little new finance to the insolvent entity as possible.

While it was becoming an increasingly widespread practice to set new terms with respect to adjustment programmes, social reform and debt rescheduling, it was also necessary to reduce the debt stock.

quot 8. Invites bilateral and multilateral creditors and commercial banks to implement new initiatives including debt swaps, and debt and debt service cancellation for debtor developing countries in response to the implementation of outcomes and action plans of major United Nations conferences

Developing countries will in future have regularly to take on new debt, not for investment, but for repayment.

Debt sustainability and debt relief

(e) In connection with debt management, it is proposed to introduce new activities for a total allocation of 120,000.

Consideration should be given to extend the benefit of debt reductions under the Brady Plan to the new debtors .

For many developing countries, the issue of resource flows cannot be dissociated from that of the external debt problem. Figures continue to indicate that the overall debt of developing countries is still on the increase. We believe that new, comprehensive and coordinated approaches to the debt and debt servicing problem have to be adopted, including outright forgiveness.

Why do Greece s creditors refuse to move on debt restructuring before any new loans are negotiated? And why do they prefer a much larger new loan package than necessary?

In 2012, as the debt to GDP ratio skyrocketed, Greece s private creditors were given a significant 34 haircut. At the same time, however, new loans worth 63 of GDP were added to Greece s national debt.

New international pacts and alliances were necessary so that costs of housing and sanitation would not be included in foreign debt.

He also suggested testing new methods to hold Governments accountable in relation to their international policies on trade, aid and debt.

The plan takes effect from 1 August 1998, and is centred around a new institution, the Indonesian Debt Restructuring Agency (INDRA).

In that respect, the report requested that analyses undertaken to determine eligibility for the new debt initiative should not foreclose the possibility of adding to the list of countries requiring special assistance with their debt situations.

Debt

Debt

Debt?

External debt and debt servicing costs had also risen.

Debt for equity swaps Other debt for development swaps

Most economists failed to foresee the economic dynamics that actually led to the crisis, because they failed to pay enough attention to the rapid increase in US total debt. Instead, they focused exclusively on US foreign debt, ignoring household debt (mortgage and consumer debt), public debt, business debt, and financial debt.

We intend to promote new efforts in matters of foreign debt that transcend our bilateral obligations in the framework of the Heavily Indebted Poor Countries (HIPC) Debt Initiative and to contribute decisively to the solution of the problem of the external debt of these countries with the multilateral financial institutions.

We are not asking for debt forgiveness or debt cancellation.

Overall, short term debt and total debt service also declined.

Argentina s interests and those of its creditors were thus aligned both wanted growth. It was the equivalent of a Chapter 11 restructuring of American corporate debt, in which debt is swapped for equity, with bondholders becoming new shareholders.

I would not listen to those who advocate excluding investment from fiscal deficits this would only offer new incentives for creative accounting and unsustainable accumulation of debt. Instead, the emphasis should shift from annual deficits to debt sustainability.

The document will also assess medium term prospects for export led growth, taking into account recent trends in investment, the external debt burden and the possible impact of the new debt initiative on heavily indebted poor countries (HIPCs).

NEW YORK Like individuals, corporations, and other private firms that rely on bankruptcy procedures to reduce an excessive debt burden, countries sometimes need orderly debt restructuring or reduction. But the ongoing legal saga of Argentina s fight with holdout creditors shows that the international system for orderly sovereign debt restructuring may be broken.