Structuring and Restructuring Sovereign Debt: The Role of Seniority

Patrick Bolton and Olivier Jeanne

No 11071, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: In an environment characterized by weak contractual enforcement, sovereign lenders can enhance the likelihood of repayment by making their claims more difficult to restructure. We show within a simple model how competition for repayment between lenders may result in sovereign debt that is excessively difficult to restructure in equilibrium. Alleviating this inefficiency requires a sovereign debt restructuring mechanism that fulfills some of the functions of corporate bankruptcy regimes, in particular the enforcement of seniority and subordination clauses in debt contracts.

JEL-codes: F3 G3 (search for similar items in EconPapers)
Date: 2005-01
New Economics Papers: this item is included in nep-fin
Note: CF IFM
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Citations: View citations in EconPapers (22)

Published as Patrick Bolton & Olivier Jeanne, 2009. "Structuring and Restructuring Sovereign Debt: The Role of Seniority-super-1," Review of Economic Studies, Blackwell Publishing, vol. 76(3), pages 879-902, 07.

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Working Paper: Structuring and Restructuring Sovereign Debt: The Role of Seniority (2005)
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