Haircuts: Estimating Investor Losses in Sovereign Debt Restructurings, 1998-2005

By Jeromin Zettelmeyer, Federico Sturzenegger

July 1, 2005

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Jeromin Zettelmeyer, and Federico Sturzenegger. Haircuts: Estimating Investor Losses in Sovereign Debt Restructurings, 1998-2005, (USA: International Monetary Fund, 2005) accessed November 22, 2024

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 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

Publication Details

Pages:

67
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2005/137
Stock No:

WPIEA2005137
ISBN:

9781451861563
ISSN:

1018-5941

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