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Valuation of Menu items in Debt Restructuring

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  • International Monetary Fund

Abstract

This paper outlines a procedure for calculating the cash value of “menu items” in debt restructuring proposals, including par and non-par exchanges, with enhancements consisting of either interest or principal guarantees. It is argued that under certain plausible assumptions interest and principal guarantees are directly equivalent to cash buy-backs. Using these assumptions, formulas to calculate the exchange ratios, resource requirements, interest rates, and net debt reduction for particular menu items are derived. It is shown that there is not a direct relationship between the exchange discount and the market price.

Suggested Citation

  • International Monetary Fund, 1989. "Valuation of Menu items in Debt Restructuring," IMF Working Papers 1989/069, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:1989/069
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