Article 27Where an enterprise (debtor) enters into an agreement with a creditor so as to substitute the existing financial liabilities by way of any new financial liability, and if the contractual stipulations regarding the new financial liability is substantially different from that regarding the existing financial liability, it shall terminate the recognition of the existing financial liability, and shall at the same time recognize the new financial liability.

Light bars represent debt cancellation or rescheduling.

A New Deal for Debt Overhangs?

And we came up with this idea of issuing bonds, press freedom bonds.

Other debt renegotiations

II. Recent trends in external debt

A New Approach to Eurozone Sovereign Debt

Beban Utang Tersembunyi pada Negara negara Emerging Market

Rebalancing the State s Balance Sheet

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 existing international strategies for debt reduction and rescheduling were insufficient to alleviate the debt burden of heavily indebted poor countries.

The authorities will issue 35.2 billion in new securities, comprising 15 billion in par bonds, 11.9 billion in discount bonds and 8.3 billion in quasi par bonds.

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 Coming Emerging Market Debt Squeeze

Both lending and borrowing countries must undertake effective measures to ensure debt forgiveness and debt rescheduling in order to solve that worldwide problem.

In addition, such provisions prevent Cuba from having access to global settlement mechanisms for a possible rescheduling and or restructuring of its external debt.

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

The shift favors hardline creditors in bond issuances governed by US law. With emerging market growth slowing, and external debt rising, new legal interpretations that make debt future write downs and reschedulings more difficult do not augur well for global financial stability.

Paris Club debt reschedulings

77. Some formal framework is needed to prevent moral hazard behaviour by debtors and to allow payments suspensions which are part of a process of cooperative and non confrontational debt renegotiation between debtors and creditors.23 There are no formal means for explicitly approving decisions by sovereign debtors to suspend payments.

As repeated reschedulings involve costs for the debtor countries and contribute to further accumulation of debt, the concept of reduction of the stock of debt (instead of the flows of debt service) was introduced by the Paris Club in 1994 and allowed for an exit from a repeated cycle of debt reschedulings.

Once a vulnerable country's debts are cancelled, if an attempt is made to run it without balancing the balance sheet, debt could easily reconsume it.

In that regard, his delegation welcomed the update of the international debt strategy provided by the Development Committee, in particular, debt structuring, either rescheduling or partial cancellation of debt servicing obligations due over a period of time, or reduction in the stock of debt itself.

62. For all those reasons, Ethiopia called for the establishment of additional innovative debt reduction and cancellation mechanisms.

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

(d) Lead to an orderly long term renegotiation of debts.

Permanent debtor creditor dialogues, the provision of transparency, and information on emerging market debt would be ensured through the creation of a permanent international debt framework secretariat.

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

In the United States successful Brady Bond plan in 1989, the debtors Mexico, Argentina, and Brazil agreed to pay what they could. The banks that had loaned them the money replaced the old debt with new bonds at par value, which averaged 50 of the old bonds, and the US government provided some sweeteners.

In other words, investors are expecting to receive only about half of what they are owed. The hope is that the reduction in borrowing costs on new loans, plus the austerity programs promised by governments, will enable bond prices to recover to par without the need for the creditor banks to take a hit.

Moreover, some debtor countries which have gone through debt restructurings soon resumed their access to capital markets.

A Korean negotiating team met with a steering committee of international creditor banks to negotiate a restructuring of the short term debt.

A deal was finally reached in June 1998 on the restructuring of interbank debt, corporate debt and trade credits.

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

The debt burden is crushing hopes for the relaunching of its development.

4. Stresses the need for new financial flows to debtor developing countries

B. Recent developments in debt renegotiations

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.

45. The rescue is notable in that there was no attempt to restructure the debt profile, probably because debt was largely in the form of bonds that had been widely dispersed among portfolio investors. It would have been extremely difficult to locate the creditors and to organize a mechanism through which restructuring could be negotiated, and the free rider problems would have been uncontrollable.

22. As noted earlier, official debt is renegotiated within the frameworks of the Paris Club and the HIPC initiative, respectively.

Sometimes, debt service payments are rescheduled and perhaps stretched out over a longer period, thus giving the debtor country time to regain its ability to pay. Sometimes, creditors agree to exchange the old bonds for new ones, which have either a lower face value or lower interest payments.

The objective is to tailor debt restructuring to the financial needs of the country concerned and to ensure debt sustainability and an exit from Paris Club debt reschedulings.

Some sovereign debtors and private creditors have been attempting to develop voluntary Principles of stable capital flows and fair debt restructuring in emerging markets , but progress has been slow.

4. Bearing in mind the joint responsibility of both debtors and creditors in the accumulation of African debt, innovative approaches involving the affected countries are required.

Of the seven debtor countries that rescheduled in that year, only Jordan is non HIPC and is expected to graduate from the rescheduling process thereafter.