Recovery Rates from Distressed Debt: Empirical Evidence from Chapter 11 Filings, International Litigation, and Recent Sovereign Debt Restructuring, Issues 2003-2161
International Monetary Fund, International Capital Markets Department, 2003 - Bankruptcy - 24 pages
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.
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MLHY Indices vs EMBI+ Index
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annualized returns averaging Argentine Bondholder Committee Bank of Uganda bankruptcy Beta distribution Cardinal central bank immunity central banks assets Claim Debtor Face Claim Litigation Settled clearing systems Clearstream commercial creditors continental Europe corporate bond Cote d'lvoire Court Credit Default Swap Crossover investors debt-workout Debtor Face Value distressed debt accounts distressed debt investors distressed debt market distressed EM debt Ecuador Elliott Associates EMBI+ emerging market debt Empirically Euroclear example of illiquid High Yield Index HY corporate debt illiquid debt Immunity Act interest arrears interest rate spreads legal asymmetry legal fees litigation arbitrage Litigation Settled Holder Lynch High Yield Market sources indicate Merrill Lynch Merrill Lynch High MLHY Moody's Nicaragua original Uganda payment Peru probability of default recovery rate recovery value Red Mountain Sovereign Debt sovereign EM debt sovereign emerging market sovereign immunity spreads than similarly U.S. corporate U.S. HY debt vulture funds Water Street Bank wire transfer Yemen