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Journal Article
Why is the Philippines repurchasing its Brady bonds?
Discussion Paper
Reviving mortgage securitization: lessons from the Brady Plan and duration analysis
We review the period of the Latin American debt crisis in order to draw policy analogies from that experience for current U.S. credit securitization markets. During the earlier episode the Brady Plan used a zero-coupon U.S. Treasury security to provide a credit enhancement for the troubled assets. This revitalized the market for Latin American debt by: (1) ameliorating the dual solvency problem that affected both creditors and debtors, and (2) revealing asset prices as dominated by risk fundamentals rather than by short-run factors. The cost of the Brady plan was quite small relative to its ...
Journal Article
Debt reduction and market reentry under the Brady plan
In March 1989, U.S. Treasury Secretary Brady proposed a new approach to resolving the developing country debt problem and restoring the creditworthiness of restructuring countries. The Brady Plan encouraged market-based reductions in debt and debt service for countries implementing economic reforms. This article analyzes the structure of the financial packages that followed this change in approach and considers their impact on countries and their creditors.
Working Paper
\"Burden sharing\" in sovereign debt reduction
We examine a concerted debt reduction deal between a sovereign debtor, a private creditor, and an official creditor, who insures the deposits of the commercial bank. Our results show that a weakening of the financial position of the commercial bank reduces the contribution of the commercial bank and increases that of the official creditor, without affecting the net terms faced by the debtor. This result is robust to changes in seniority. Moreover, leaving both creditor values unchanged requires that commercial banks retire debt at "unfairly" high prices, while official creditors make a net ...