Valuation of Menu items in Debt Restructuring

International Monetary Fund

No 1989/069, IMF Working Papers from International Monetary Fund

Abstract: This paper outlines a procedure for calculating the cash value of “menu items” in debt restructuring proposals, including par and non-par exchanges, with enhancements consisting of either interest or principal guarantees. It is argued that under certain plausible assumptions interest and principal guarantees are directly equivalent to cash buy-backs. Using these assumptions, formulas to calculate the exchange ratios, resource requirements, interest rates, and net debt reduction for particular menu items are derived. It is shown that there is not a direct relationship between the exchange discount and the market price.

Keywords: WP; debt; net debt reduction; restructuring plan (search for similar items in EconPapers)
Pages: 16
Date: 1989-01-01
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