Debt Write-Downs and Debt-Equity Swaps in the Two Sector Model / Linda S. Goldberg, Mark Spiegel.

Format:

Book

Author/Creator:

Goldberg, Linda S.

Contributor:

National Bureau of Economic Research.

Spiegel, Mark.

Series:

Working Paper Series (National Bureau of Economic Research) no. w3121.

NBER working paper series no. w3121

Language:

English

Subjects (All):

Debt equity conversion.

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1989.

Cambridge, Mass : National Bureau of Economic Research, 1989.

Summary:

"Debt overhang" models have motivated the possibility of Pareto-improving "market-based debt-reduction schemes" under an assumption of creditor seizure in bad states. These models usually reach the conclusion that while pure debt forgiveness is in the interest of debtor nations, debt repurchase programs are not. This paper introduces a "safe sector" into the debtor nation which is unexposed to seizure during default states. Two important results which emerge are that debt forgiveness is not necessarily in the interest of all debtors, and the potential for Pareto-improving debt-equity swaps is magnified.

Notes:

Print version record

September 1989.