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Structuring and Restructuring Sovereign Debt: The Role of Seniority


Patrick Bolton


Columbia Business School - Department of Economics; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI)

Olivier Jeanne


International Monetary Fund (IMF) - Research Department; Ecole Nationale des Ponts et Chaussees (ENPC); Centre for Economic Policy Research (CEPR)
January 2005

NBER Working Paper No. w11071

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.

Number of Pages in PDF File: 62

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Date posted: February 16, 2005  

Suggested Citation

Bolton, Patrick and Jeanne, Olivier, Structuring and Restructuring Sovereign Debt: The Role of Seniority (January 2005). NBER Working Paper No. w11071. Available at SSRN: http://ssrn.com/abstract=653001

Contact Information

Patrick Bolton (Contact Author)
Columbia Business School - Department of Economics ( email )
3022 Broadway
New York, NY 10027
United States
HOME PAGE: http://www0.gsb.columbia.edu/faculty/pbolton/

Centre for Economic Policy Research (CEPR)
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
European Corporate Governance Institute (ECGI)
c/o ECARES ULB CP 114
B-1050 Brussels
Belgium
HOME PAGE: http://www.ecgi.org
Olivier Jeanne
International Monetary Fund (IMF) - Research Department ( email )
700 19th Street NW
Room 10-548L
Washington, DC 20431
United States
202-623-4272 (Phone)
202-623-6334 (Fax)
Ecole Nationale des Ponts et Chaussees (ENPC) ( email )
28 rue des Saints-Pres
75007 Paris
France
+33 1 44 58 28 76 (Phone)
+33 1 44 58 28 80 (Fax)
Centre for Economic Policy Research (CEPR)
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
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