The Government followed up on the debt restructuring by directing the banks to arrange corporate restructuring of distressed indebted firms.

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

Restructuring Debt Restructuring

Proposals on debt restructuring frameworks

The Lethal Deferral of Greek Debt Restructuring

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.

There have been many proposals on debt restructuring mechanisms.

Canada has been restructuring government spending to reduce its debt.

IMF staff have produced a number of reports on corporate insolvency, bank insolvency and the restructuring of unsustainable sovereign debt, including Orderly and Effective Insolvency Procedures Key Issues (1999) (analysing major policy choices to be addressed in the design of an effective corporate insolvency system).

Third, while pesification removes balance sheet losses from domestic foreign currency debts, external contractual obligations cannot be redenominated unilaterally. Thus, the exit from the dollar peg requires a restructuring of external debt, both sovereign and corporate.

The most recent debt restructuring of Argentina illustrated well the conditions described above.

Some participants stated that collective action clauses were a useful feature of debt restructuring.

India did its part by writing off the debt owed by African countries under the HIPC Initiative and by restructuring commercial debt.

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.

An international debt framework commission would aim for a coherent and comprehensive debt restructuring when requested to do so by the debtor country.

41. Debt conversion programmes have also played an important role in commercial debt restructuring in the past, but such activity has declined recently.

Indeed, given the distressing debt indicators for Indonesia it is likely that economic stability would not have been possible without a debt restructuring agreement.

For many heavily indebted non HIPC and middle income countries, debt sustainability will require significantly more debt reduction or restructuring than has yet been proposed.

47. A complementary proposal would further encourage creditor cooperation in restructuring the debt due in such circumstances.

It is complemented by analytical work examining ways to improve corporate governance, enhance enterprise restructuring and increase competition in the industrial sector.

NEW YORK Nothing illustrates better the political crosscurrents, special interests, and shortsighted economics now at play in Europe than the debate over the restructuring of Greece s sovereign debt. Germany insists on a deep restructuring at least a 50 haircut for bondholders whereas the European Central Bank insists that any debt restructuring must be voluntary.

It also welcomed the reference to the need to consider debt relief or restructuring for those middle income countries that had an unsustainable level of debt.

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.

It began considering options for restructuring INTELSAT, including the creation of one or more corporate subsidiaries that would function as ordinary multinational companies.

And even 2 growth will not render Europe s triple digit debt GDP ratios sustainable. Europe still needs debt restructuring, though the continent s leaders refuse to acknowledge this.

Under the Evian approach, the Debt Sustainability Analysis (DSA) undertaken by IMF for each debtor country plays a critical role in shaping the outcome of debt restructuring.

Regarding situations in which there was significant external debt owed to private creditors, many participants encouraged continued efforts to establish an appropriately designed, independent debt restructuring framework.

Then, unless the EFSF pot were tripled a move that Germany would resist the only option left would become an orderly but coercive restructuring of Italian and Spanish debt, as has happened in Greece. Coercive restructuring of insolvent banks unsecured debt would be next.

Fifth, debt burdens that cannot be eased by growth, savings, or inflation must be rendered sustainable through orderly debt restructuring, debt reduction, and conversion of debt into equity. This needs to be carried out for insolvent governments, households, and financial institutions alike.

In such a situation, the only option available for the Government was to seek debt restructuring to alleviate the debt burden or to have short term cash flow relief.

In that regard, greater attention should be paid to debt contracted by developing countries with multilateral financial institutions. Furthermore, the guidelines set for negotiating debt restructuring should be respected.

Then, unless the EFSF pot were nbsp tripled a move that Germany would resist nbsp the only option left would become an orderly but coercive restructuring of Italian and Spanish debt, as has happened in Greece. Coercive restructuring of insolvent banks unsecured debt would be next.

Poor s found that, a year later, these firms total debt amounted to 14.2 trillion, eclipsing the 13.1 trillion of outstanding debt in the United States and making China the world s largest issuer of corporate debt.

11 The present section draws on World Bank Global Development Finance, 1998, appendix 3, Commercial debt restructuring , pp. 83 102.

26. The international community has also provided assistance to debtor countries in the restructuring of their debt to commercial banks.

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

15. Regarding the debt problem, his Government had signed an agreement with the Paris Club on a comprehensive mid term restructuring of its debt, and another accord with the creditors of the London Club on rescheduling its commercial debt.

And Greece is in the throes of a humanitarian crisis today because the inevitable restructuring of its debt has been used as an excuse for postponing that restructuring ad infinitum. As a high ranking European Commission official once asked me Your debt will be cut come hell or high water, so why are you expending precious political capital to insist that we deliver the restructuring now?

The consultations also explored possible modalities of a debt workout mechanism aimed at efficient and equitable burden sharing among affected parties, such as the sovereign debt restructuring mechanism (SDRM) proposed by IMF.

The international community has, so far, failed to develop effective and equitable arrangements for restructuring sovereign debt, despite the clearly dysfunctional and problematic consequences of past international public debt crises. This prevents timely debt workouts when needed, effectively impeding recovery.

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

This has occurred largely through buy backs supported by the World Bank s Debt Restructuring Facility and the IMF s Economic Structural Adjustment Facility for low income countries and through officially supported debt and debt service reduction programmes (Brady operations) for middle income countries.

The Government raised US 1,000 million towards the restructuring of the public debt (reduction of debt service by US 80 to 90 million annually) on the international market at the end of March 1998.

The most reasonable comparison is with Latin American countries during their debt crises in the 1980 s and 1990 s. Despite significantly lower debt GDP ratios and continuous debt restructuring, they eventually needed the large debt reduction that came with the issuance of Brady bonds to achieve some breathing room.

Such contracts should also include collective action clauses, which make it impossible for vulture funds to hold up debt restructuring. When a sufficient proportion of creditors agree to a restructuring plan (in the case of Argentina, the holders of more than 90 of the country s debt did), the others can be forced to go along.