A (Voluntary) Offer They Can't Refuse: Restructuring Italy's Sovereign Debt

20 Pages Posted: 8 Jun 2012 Last revised: 22 Nov 2012

Melissa Boudreau

affiliation not provided to SSRN

Matt McGuire

affiliation not provided to SSRN

Logan Starr

affiliation not provided to SSRN

Andrew Yates

affiliation not provided to SSRN

Date Written: June 7, 2012

Abstract

Italy is not Greece, but it faces considerable financial challenges in the coming years. Although we find that the Italian debt stock is quite conducive to a restructuring via local law, the lessons learned from Greece caution against taking drastic action now that would compromise Italy’s ability to confront a possible future crisis. Thus, we propose a modest plan that would allow Italy to take action now and achieve meaningful results while remaining prepared for what the future may bring. Specifically, we encourage Italy to lessen its debt load through a voluntary bond exchange in which Italy issues new Italian-law bonds with reduced principal in exchange for increased investor protections against further restructuring.

Our analysis proceeds in four parts. Part I assesses Italy’s current situation in light of the recent Greek restructuring. Part II examines the Italian debt stock, with emphasis on its current ownership and governing law. Part III considers the range of options available to Italy at this time. Finally, Part IV explains our plan for Italy.

Suggested Citation

Boudreau, Melissa and McGuire, Matt and Starr, Logan and Yates, Andrew, A (Voluntary) Offer They Can't Refuse: Restructuring Italy's Sovereign Debt (June 7, 2012). Available at SSRN: https://ssrn.com/abstract=2079715 or http://dx.doi.org/10.2139/ssrn.2079715

Melissa Boudreau (Contact Author)

affiliation not provided to SSRN

Matt McGuire

affiliation not provided to SSRN

Logan Starr

affiliation not provided to SSRN

Andrew Yates

affiliation not provided to SSRN

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