by With Tamon Asonuma and Romain Ranciere. UniBe Discussion Paper 22-13, November 2022. PDF. We document that creditor losses (”haircuts”) during sovereign debt restructurings vary across debt maturity. In our novel dataset on instrument-specific haircuts suffered by private creditors in 1999-‒2020 we find larger losses on short- than long-term debt, independently of the specific haircut measure we use. A standard asset pricing model rationalizes our findings under two assumptions, both of which are satisfied in the data: increasing short-run restructuring risk in the run-up to a restructuring, and high exit yields. We relate our findings to the policy debate on restructuring procedures.
Topics:
Dirk Niepelt considers the following as important: Contributions, default, Haircut, Maturity, Maturity structure, Research, Restructuring, Risk Premium, Sovereign Debt
This could be interesting, too:
Dirk Niepelt writes “Finanzplatz steuert auf eine Verstaatlichung der UBS zu (Switzerland on its Way to Nationalizing UBS),” NZZ, 2023
Dirk Niepelt writes Plans for a Deposit Token in Switzerland
Dirk Niepelt writes Vienna
Dirk Niepelt writes “Sovereign Bond Prices, Haircuts and Maturity,” JIE, 2023
With Tamon Asonuma and Romain Ranciere. UniBe Discussion Paper 22-13, November 2022. PDF.
We document that creditor losses (”haircuts”) during sovereign debt restructurings vary across debt maturity. In our novel dataset on instrument-specific haircuts suffered by private creditors in 1999-‒2020 we find larger losses on short- than long-term debt, independently of the specific haircut measure we use. A standard asset pricing model rationalizes our findings under two assumptions, both of which are satisfied in the data: increasing short-run restructuring risk in the run-up to a restructuring, and high exit yields. We relate our findings to the policy debate on restructuring procedures.