Creditor Activism in Sovereign Debt: Vulture Tactics or Market Backbone Harvard Case Solution & Analysis

The role of distressed debt funds, also known as "vulture funds" in sovereign debt restructuring has been a hotly debated topic, especially after the success of Elliot Associates to convert $ 11 million investment in the Peruvian bonds worth $ 21 million to $ 58 million of cash payments from country representing the full face value of the bonds plus interest arrears. Key issues in coordination with the debt restructuring. On the one hand, many observers ridiculed firms such as Elliott and Dart, as "vultures" or "rouge creditors" who sought to capitalize on the restructuring sovereign debt by countries suffering from economic difficulties and the majority of bondholders whose cooperation allowed the restructuring to take place. Critics say that these control lenders have created a "collective action problems" and presented a major obstacle to the successful restructuring of sovereign debt. On the other hand, other observers argue that activist investors actually improved market as a whole, showing the contracts. In fact, they argued that the lenders face too many obstacles in collecting against countries after receiving a favorable decision in support of the claims. "Hide
by Laura Alfaro, Ingrid Vogel Source: Harvard Business School 25 pages. Publication Date: Jun 09, 2006. Prod. #: 706057-PDF-ENG

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Creditor Activism in Sovereign Debt: Vulture Tactics or Market Backbone

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