Identifying and Resolving Inter-creditor and Debtor-Creditor Equity Issues in Sovereign Debt Restructuring

CIGI Policy Brief No. 53

January 12, 2015

Most discussions of inter-creditor issues vis-à-vis sovereign debt restructuring focus on the collective action problems that lead to individually and collectively suboptimal outcomes. Some studies also highlight, or at least imply, that creditor interests are often relatively aligned with debtor interests, insofar as both groups want to avoid crises and, when they occur, resolve them with minimal disruption. This, of course, is not always the case, in particular when creditor groups are non-homogenous. In many cases, significant conflicts of interest exist and can undermine inter-creditor, as well as debtor-creditor, equity and cooperation during debt restructurings. This policy brief draws on a joint workshop with Columbia University on Frameworks for Sovereign Debt Restructuring, held in New York on November 17, 2014. It narrows in on a specific set of salient issues that affect debt restructuring processes and outcomes: those related to inter-creditor and creditor-debtor equity. It also offers a few policy considerations for beginning to resolve these issues in ways that contribute to fairer and more effective debt restructurings.

About the Authors

Martin Guzman is a CIGI senior fellow and served as a minister of economy of Argentina. He is an expert on sovereign debt restructuring, with a specific interest in the sovereign debt crises in Argentina and Greece.

Joseph E. Stiglitz is co-president of the IPD, and chairman of the Committee on Global Thought at Columbia University.