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Recovery Rates From Distressed Debt: Empirical Evidence From Chapter 11 Filings, International Litigation, and Recent Sovereign Debt Restructurings

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  • Mr. Manmohan Singh

Abstract

On a credit rating-adjusted basis, spreads on U.S. high-yield debt have typically been regarded as a lower bound for emerging market debt. However in the C-rated and defaulted segment, emerging market debt has traded at lower spreads than similarly rated U.S. high yield debt. We show that the lower spreads reflect the fact that the total returns from defaulted debt in the emerging markets have been significantly higher than returns from similarly rated high yield defaulted debt under Chapter 11.

Suggested Citation

  • Mr. Manmohan Singh, 2003. "Recovery Rates From Distressed Debt: Empirical Evidence From Chapter 11 Filings, International Litigation, and Recent Sovereign Debt Restructurings," IMF Working Papers 2003/161, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2003/161
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    References listed on IDEAS

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    1. Edward I. Altman, 1968. "Financial Ratios, Discriminant Analysis And The Prediction Of Corporate Bankruptcy," Journal of Finance, American Finance Association, vol. 23(4), pages 589-609, September.
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    Cited by:

    1. Schumacher, Julian & Trebesch, Christoph & Enderlein, Henrik, 2021. "Sovereign defaults in court," Journal of International Economics, Elsevier, vol. 131(C).
    2. Rohan Pitchford & Mark L. J. Wright, 2012. "Holdouts in Sovereign Debt Restructuring: A Theory of Negotiation in a Weak Contractual Environment," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 79(2), pages 812-837.
    3. Mr. Jochen R. Andritzky & Mr. Manmohan Singh, 2005. "Overpricing in Emerging Market Credit-Default-Swap Contracts: Some Evidence from Recent Distress Cases," IMF Working Papers 2005/125, International Monetary Fund.
    4. Hanno Lustig, 2004. "The Cross-Section of Foreign Currency Risk Premia and US Consumption Growth Risk (joint with Adrien Verdelhan)(updated February 2006)," UCLA Economics Online Papers 303, UCLA Department of Economics.
    5. Hanno Lustig & Adrien Verdelhan, 2007. "The Cross Section of Foreign Currency Risk Premia and Consumption Growth Risk," American Economic Review, American Economic Association, vol. 97(1), pages 89-117, March.
    6. Ghosal Sayantan & Miller Marcus, 2015. "Writing-Down Debt with Heterogeneous Creditors: Lock Laws and Late Swaps," Journal of Globalization and Development, De Gruyter, vol. 6(2), pages 239-255, December.
    7. Doriana Ruffino & Jonathan Treussard, 2006. "A Study of Inaction in Investment Games via the Early Exercise Premium Representation," Boston University - Department of Economics - Working Papers Series WP2006-040, Boston University - Department of Economics.
    8. Ugo Panizza & Federico Sturzenegger & Jeromin Zettelmeyer, 2009. "The Economics and Law of Sovereign Debt and Default," Journal of Economic Literature, American Economic Association, vol. 47(3), pages 651-698, September.
    9. Hanno Lustig & Adrien Verdelhan, 2005. "The Cross-Section of Currency Risk Premia and US Consumption Growth Risk," NBER Working Papers 11104, National Bureau of Economic Research, Inc.
    10. Julian Schumacher & Christoph Trebesch & Henrik Enderlein, 2015. "What Explains Sovereign Debt Litigation?," Journal of Law and Economics, University of Chicago Press, vol. 58(3).
    11. Mansell Wade & Openshaw Karen, 2009. "Suturing the Open Veins of Ecuador: Debt, Default and Democracy," The Law and Development Review, De Gruyter, vol. 2(1), pages 151-191, September.
    12. Rohan Pitchford & Mark L. J. Wright, 2013. "On the contribution of game theory to the study of sovereign debt and default," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 29(4), pages 649-667, WINTER.
    13. Federico Sturzenegger and Jeromin Zettelmeyer, 2006. "Has the Legal Threat to Sovereign Debt Restructuring Become Real?," Business School Working Papers legalthreat, Universidad Torcuato Di Tella.
    14. Juan Carlos Hatchondo & Leonardo Martinez, 2011. "Legal protection to foreign investors," Economic Quarterly, Federal Reserve Bank of Richmond, vol. 97(2Q), pages 175-187.

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