In finance, a haircut is the difference between the current market value of an asset and the value ascribed to that asset for purposes of calculating regulatory capital or loan collateral. The amount of the haircut reflects the perceived risk of the asset falling in value in an immediate cash sale or liquidation. The larger the risk or volatility of the asset price, the larger the haircut.
Debt restructuring is a process that allows a private or public company or a sovereign entity facing cash flow problems and financial distress to reduce and renegotiate its delinquent debts to improve or restore liquidity so that it can continue its operations.
In finance, a holdout problem occurs when a bond issuer is in default or nears default, and launches an exchange offer in an attempt to restructure debt held by existing bond holders. Such exchange offers typically require the consent of holders of some minimum portion of the total outstanding debt, often in excess of 90%, because, unless the terms of the bond provide otherwise, non-consenting bondholders will retain their legal right to demand repayment of their bonds at par. Bondholders who withhold their consent and retain their right to seek the full repayment of original bonds, may disrupt the restructuring process, creating a situation known as the holdout problem.
The debt of developing countries usually refers to the external debt incurred by governments of developing countries.
Paris Club is a group of major creditor countries aiming to provide a sustainable way to tackle debt problems in debtor countries.
Brady bonds are dollar-denominated bonds, issued mostly by Latin American countries in the late 1980s. The bonds were named after U.S. Treasury Secretary Nicholas Brady, who proposed a novel debt-reduction agreement for developing countries.
In accounting, insolvency is the state of being unable to pay the debts, by a person or company (debtor), at maturity; those in a state of insolvency are said to be insolvent. There are two forms: cash-flow insolvency and balance-sheet insolvency.
In corporate finance, distressed securities are securities over companies or government entities that are experiencing financial or operational distress, default, or are under bankruptcy. As far as debt securities, this is called distressed debt. Purchasing or holding such distressed-debt creates significant risk due to the possibility that bankruptcy may render such securities worthless.
A vulture fund is a hedge fund, private-equity fund or distressed debt fund, that invests in debt considered to be very weak or in default, known as distressed securities. Investors in the fund profit by buying debt at a discounted price on a secondary market and then using numerous methods to subsequently sell the debt for a larger amount than the purchasing price. Debtors include companies, countries, and individuals.
The Argentine debt restructuring is a process of debt restructuring by Argentina that began on January 14, 2005, and allowed it to resume payment on 76% of the US$82 billion in sovereign bonds that defaulted in 2001 at the depth of the worst economic crisis in the nation's history. A second debt restructuring in 2010 brought the percentage of bonds under some form of repayment to 93%, though ongoing disputes with holdouts remained. Bondholders who participated in the restructuring settled for repayments of around 30% of face value and deferred payment terms, as well as warrants that paid investors based on annual economic growth as part of the same offer, and began to be paid punctually; the value of their nearly worthless bonds also began to rise. The remaining 7% of bondholders were later repaid 25% less than they were demanding, after centre-right and US-aligned leader Mauricio Macri came to power in 2015.
Restructuring or Reframing is the corporate management term for the act of reorganizing the legal, ownership, operational, or other structures of a company for the purpose of making it more profitable, or better organized for its present needs. Other reasons for restructuring include a change of ownership or ownership structure, demerger, or a response to a crisis or major change in the business such as bankruptcy, repositioning, or buyout. Restructuring may also be described as corporate restructuring, debt restructuring and financial restructuring.
David Martínez Guzmán is a Mexican investor who is the founder and managing partner of Fintech Advisory. This firm specializes in corporate and sovereign debt. Fintech Advisory has offices in London and New York City, and he currently divides his time between those two cities.
A sovereign default is the failure or refusal of the government of a sovereign state to pay back its debt in full when due. Cessation of due payments may either be accompanied by that government's formal declaration that it will not pay its debts (repudiation), or it may be unannounced. A credit rating agency will take into account in its gradings capital, interest, extraneous and procedural defaults, and failures to abide by the terms of bonds or other debt instruments.
Debt crisis is a situation in which a government loses the ability of paying back its governmental debt. When the expenditures of a government are more than its tax revenues for a prolonged period, the government may enter into a debt crisis. Various forms of governments finance their expenditures primarily by raising money through taxation. When tax revenues are insufficient, the government can make up the difference by issuing debt.
Hernán Gaspar Lorenzino is an Argentine lawyer and public policy maker. He was appointed Minister of Economy of Argentina by President Cristina Kirchner in 2011.
In the context of sovereign debt crisis, private sector involvement (PSI) refers, broadly speaking, to the forced contribution of private sector creditors to a financial crisis resolution process, and, specifically, to the private sector incurring outright reductions ("haircuts") on the value of its debt holdings.
Kenneth Bryan Dart is a Cayman Islands-based billionaire businessman. He is also a citizen of Belize and Ireland. His wealth was estimated in 2013 at US$6.6 billion. His family founded Dart Container, a food and beverage packaging company and the owner of Solo Cup.
Ajata "AJ" Mediratta is an American investor who has worked in financial markets, particularly in fixed income emerging markets and in sovereign debt restructurings. He is a president at Greylock Capital Management, LLC, an alternative asset investment adviser. Mediratta is active in Greylock Capital's investment activity and debt restructuring efforts globally.
Greylock Capital Management, LLC is a U.S. Securities and Exchange Commission registered alternative investment adviser that invests globally in high yield, undervalued, and distressed assets worldwide, particularly in emerging and frontier markets. The firm was founded in 2004 by Hans Humes from a portfolio of emerging market assets managed by Humes while at Van Eck Global. AJ Mediratta joined the firm in 2008 from Bear Stearns and serves as its president.
