Product details

By continuing to use our site you consent to the use of cookies as described in our privacy policy unless you have disabled them.
You can change your cookie settings at any time but parts of our site will not function correctly without them.
Published by: Harvard Business Publishing
Originally published in: 2018
Version: 16 April 2018
Revision date: 16-Nov-2018
Length: 26 pages
Data source: Published sources

Abstract

The role of distressed debt funds, also known as 'vulture funds', in sovereign debt restructuring was a hotly debated topic, especially after the success of Elliot Associates in converting an USD11 million investment in Peruvian bonds worth USD21 million into a USD58 million cash payout from the country, representing the full face value of the bonds plus past-due interest. Highlights the problems associated with debt restructuring co-ordination. On the one hand, many observers derided firms such as Elliot and Dart as 'vultures' or 'rouge creditors' who sought to profit on sovereign debt restructurings at the expense of countries suffering economic hardship and of the majority of bondholders whose co-operation allowed the restructurings to take place. Critics believed that these holdout creditors created 'collective action problems' and presented a major obstacle to successful sovereign debt restructurings. On the other hand, other observers argued that activist investors actually improved the market overall by demonstrating the enforceability of contracts. In fact, they argued that creditors faced too many hurdles in collecting against countries after receiving favorable judgments in support of claims.
Location:
Other setting(s):
1996-2006

About

Abstract

The role of distressed debt funds, also known as 'vulture funds', in sovereign debt restructuring was a hotly debated topic, especially after the success of Elliot Associates in converting an USD11 million investment in Peruvian bonds worth USD21 million into a USD58 million cash payout from the country, representing the full face value of the bonds plus past-due interest. Highlights the problems associated with debt restructuring co-ordination. On the one hand, many observers derided firms such as Elliot and Dart as 'vultures' or 'rouge creditors' who sought to profit on sovereign debt restructurings at the expense of countries suffering economic hardship and of the majority of bondholders whose co-operation allowed the restructurings to take place. Critics believed that these holdout creditors created 'collective action problems' and presented a major obstacle to successful sovereign debt restructurings. On the other hand, other observers argued that activist investors actually improved the market overall by demonstrating the enforceability of contracts. In fact, they argued that creditors faced too many hurdles in collecting against countries after receiving favorable judgments in support of claims.

Settings

Location:
Other setting(s):
1996-2006

Related