Debt workout 101 - part 3
Orderly Default: (ver em português abaixo)
1. When the borrower defaults on payment of one loan/bond, it stops paying all other creditors at the same time, imposing (unilaterally) a “stand-still”, so that no creditor is favoured with preferential repayments, nor special collateral or guarantees. Generally, borrowers are required to freeze principal reimbursements, but to continue making interest payments, pro rata, at the contractual interest rate, or at a standardized minimum interest rate applicable to all the creditors.
2. Guarantees are called and paid and guarantors take over the creditor position of the guaranteed lender
3. All loans and bond issues have cross-default clauses and thus all creditors accelerate, declaring their credits due and payable; the seniority of creditors secured with real guarantees is confirmed
4. All short and long creditors are represented the debt negotiation table
5. Debt negotiations include various elements, including
a. Increased scrutiny and monitoring by the creditors
b. Austerity and growth measures to be implemented by the borrower
c. Full accounting and review of all liabilities of the borrower, including hidden and contingent liabilities
d. Change in management of the borrower and/or the creditors, out with the rogues, who are responsable for the overleveragng, and may not even admit the problem exists
e. Restructuring of all the existing debt, for much longer tenors and softer interest rates. The exact terms of the debt restructuring may depend on the needs of the borrower and its potential for turnaround. Weaker borrowers need longer maturities, 15-25 years, and lower interest rates.
f. Creditors may also be asked to forgive or discount 10-20-30% of the debt, or convert part of the debt to equity. In these cases, creditors retain some upside, or clawback clause (salvo regresso melhor fortuna). At this stage, banks usually have to be recapitalized in order to be able to absorb the losses.
6. Existing creditors are also asked to provide new debt to help finance the borrower’s working capital, trade finance, restructuring costs and even some investments for growth in order to maximize recovery for creditors. These new credits may have to be provided by the existing creditors, pro rata to their existing exposure.
7. The borrower’s recovery is monitored continuously and the program adjusted as needed until the borrower regains access to financing on normal market terms.
.....
And they all live (more) happily ever after (than in the case of a disorderly default)
Mariana Abrantes de Sousa
Debt workout 101 - Games borrowers and lenders play 2
Debt workout 101 - Games borrowers and lenders play 1
Who's who in the Eurozone debt crisis Distribution of Eurozone debt by country of creditor
Gestão de riscos distingue os melhores bancos
Artigo de Mariana Abrantes de Sousa, A gestão de risco de crédito com principal factor de sucesso bancário, Revista da Banca, Setembro 1992
Sovereign Debt Workout Lessons from Iceland
Orderly Default: (ver em português abaixo)
1. When the borrower defaults on payment of one loan/bond, it stops paying all other creditors at the same time, imposing (unilaterally) a “stand-still”, so that no creditor is favoured with preferential repayments, nor special collateral or guarantees. Generally, borrowers are required to freeze principal reimbursements, but to continue making interest payments, pro rata, at the contractual interest rate, or at a standardized minimum interest rate applicable to all the creditors.
2. Guarantees are called and paid and guarantors take over the creditor position of the guaranteed lender
3. All loans and bond issues have cross-default clauses and thus all creditors accelerate, declaring their credits due and payable; the seniority of creditors secured with real guarantees is confirmed
4. All short and long creditors are represented the debt negotiation table
5. Debt negotiations include various elements, including
a. Increased scrutiny and monitoring by the creditors
b. Austerity and growth measures to be implemented by the borrower
c. Full accounting and review of all liabilities of the borrower, including hidden and contingent liabilities
d. Change in management of the borrower and/or the creditors, out with the rogues, who are responsable for the overleveragng, and may not even admit the problem exists
e. Restructuring of all the existing debt, for much longer tenors and softer interest rates. The exact terms of the debt restructuring may depend on the needs of the borrower and its potential for turnaround. Weaker borrowers need longer maturities, 15-25 years, and lower interest rates.
f. Creditors may also be asked to forgive or discount 10-20-30% of the debt, or convert part of the debt to equity. In these cases, creditors retain some upside, or clawback clause (salvo regresso melhor fortuna). At this stage, banks usually have to be recapitalized in order to be able to absorb the losses.
6. Existing creditors are also asked to provide new debt to help finance the borrower’s working capital, trade finance, restructuring costs and even some investments for growth in order to maximize recovery for creditors. These new credits may have to be provided by the existing creditors, pro rata to their existing exposure.
7. The borrower’s recovery is monitored continuously and the program adjusted as needed until the borrower regains access to financing on normal market terms.
.....
And they all live (more) happily ever after (than in the case of a disorderly default)
Mariana Abrantes de Sousa
Debt workout 101 - Games borrowers and lenders play 2
Debt workout 101 - Games borrowers and lenders play 1
Who's who in the Eurozone debt crisis Distribution of Eurozone debt by country of creditor
Gestão de riscos distingue os melhores bancos
Artigo de Mariana Abrantes de Sousa, A gestão de risco de crédito com principal factor de sucesso bancário, Revista da Banca, Setembro 1992
Sovereign Debt Workout Lessons from Iceland
Default controlado
1. Quando o devedor ou mutuário entra em incumprimento ou inadimplência no pagamento de um empréstimo ou obrigação, ele deixa de pagar todos os outros credores, ao mesmo tempo, impondo (unilateralmente) um "stand-still" ou congelamento de dívidas de modo que nenhum credor seja favorecido com pagamentos preferenciais, nem garantias especiais, reais ou de terceiros.
Geralmente, os mutuários são obrigados a congelar os reembolsos de capital, mas a continuar os pagamentos de juros, pro rata, à taxa de juro contratual, ou a uma taxa mínima padronizada e igual para todos os credores.
Geralmente, os mutuários são obrigados a congelar os reembolsos de capital, mas a continuar os pagamentos de juros, pro rata, à taxa de juro contratual, ou a uma taxa mínima padronizada e igual para todos os credores.
2. As garantias de pagamento que existirem são accionadas e os garantes ou fiadores passam a assumir a posição credora no crédito que garantiam (sub-rogação)
3. Todos os empréstimos e emissões de obrigações têm cláusulas de default cruzado e, portanto, todos os credores resolver os contratos, acelerando e declarando seus créditos vencidos e exigíveis; confirma-se a posição privilegiada dos credores que tenham garantias reais, tais como penhores e hipotecas sobre os bens do mutuário, se houver
4. Todos os credores de curto e longo são representados à mesa de negociação da dívida
5. Negociações da dívida podem incluir vários elementos, tais como
a. Aumento da vigilância e do acompanhamento por parte dos credores
b. Medidas de austeridade e de crescimento a serem implementadas pelo mutuário
c. Contabilização total e revisão de todas as responsabilidades do mutuário, mesmo as contingentes, reavaliação de todos os activos e passivos
d. Mudança na gestão do mutuário
e. Reestruturação de toda a dívida existente, por prazos muito mais longos e a taxas de juros mais suaves. Os termos exactos da reestruturação da dívida podem depender das necessidades do mutuário e do seu potencial de recuperação. Mutuários mais fracos precisam de prazos mais longos, 15-25 anos, e taxas de juros mais baixas.
f. Credores também podem ser solicitados a perdoar ou descontar 10-20-30% da dívida, (“haircut” ou tosquia) ou a converter parte da dívida em capital. Nestes casos, os credores ficam com alguns direitos especiais de partilhar na recuperação, tais como uma cláusula clawback (salvo regresso melhor fortuna). Nesta fase, torna-se necessário recapitalizar os bancos para que consigam absorver as perdas.
6. Credores existentes também são solicitados a fornecer crédito novo para ajudar a financiar o capital de giro do mutuário, a actividade comercial, os custos de reestruturação e até mesmo alguns investimentos para o crescimento, a fim de maximizar a recuperação para os credores. Estes novos créditos podem ter que ser fornecidos pelos mesmos credores, proporcionalmente à sua exposição existente.
7. A recuperação é monitorada continuamente e o programa é ajustado conforme necessário até que o mutuário tenha novamente acesso a financiamentos nas condições normais de mercado.
Mariana Abrantes de Sousa
No caso da Grécia, estamos agora no ponto 5(f), recapitalização dos bancos credores.
ResponderEliminarMexico nationalized its banking system 19 years ago
ResponderEliminarSovereign Debt Workout Procedures
ResponderEliminarhttp://www.eurodad.org/uploadedFiles/Whats_New/Reports/Eurodad%20debt%20workout%20principles_FINAL.pdf?n=13
Discriminating among creditors in a sovereign workout is easier if it follows easy to recognize lines like the currency of denomination or the governing law of the debt instrument.
ResponderEliminarBut the difference that really matters is between resident retail savers and non-resident cross-border investors. The mistakes and the excesses are concentrated in the cross-border external debt, even it is a moving target.
Resident retail depositors and savers used local deposits and local bonds as stores of wealth, they were not making speculative cross-border bets, nor were they arbitraging anything. In the context of freedom of capital movements, if resident investors, especially the retail kind, are not especially protected, investors will turn to capital flight or into buying property, or other forms of stockpiling.
In any case, local financial savings will shrink. And without increasing local financial savings, there is no way out of an external debt crisis.
At the very least, there's a need for a special restructuring instrument just for local resident retail savers and investors. An endangered species, the same ones who will have to pay the higher local taxes.
Not all restructurings need to involve huge debt haircuts. But the longer the delay in undertaking an orderly restructuring, the bigger the haircut.
Discriminar entre credores na restruturação da dívida soberana funciona quando se pode seguir as linhas fáceis de reconhecer tais como a a moeda de denominação ou a lei que rege o instrumento de dívida.
ResponderEliminarMas a diferença que realmente importa é entre aforradores residentes, especialmente o particulares, e investidores profissionais não-residentes.
Pequenos depositantes e aforradores residentes fizeram aplicações em depósitos e obrigações locais como reservas de riqueza. Não estavam a fazer aplicações especulativas nem e fazer arbitragem. No contexto da livre circulação de capitais, se os investidores residentes, especialmente a retalho, não forem especialmente protegidos, eles viram-se para a fuga de capitais, aplicações em imobiliário e propriedades, ou outras formas de armazenar bens reais.
Em qualquer caso, o volume de poupança financeira local vai se reduzir. E sem aumento da poupança financeira locais, não haverá saída para a crise.
No mínimo, necessita-se um instrumento de reestruturação especial só para os depositantes e aforradores locais de retalho. Uma espécie quase em extinção, os mesmos que que vão ter de pagar mais impostos para reembolso os credores estrangeiros no futuro.
Nem sempre a reestruturação de tem de resultar em grandes descontos e “tosquias”. Quanto maior o atraso em levar a cabo uma reestruturação ordenada, maior será a perda para credores e devedores.
Madeira, the rogue island, with hidden liabilities of €1.6 Bln.
ResponderEliminarOut with the rogues
Fora com os malandros
“No one has been prepared to make tough decisions,” Grantham said in a recent telephone interview. “Where have the Europeans been for 10 years? None of these things came out of the woodwork two weeks ago. No one attempted to blow the whistle and make tough decisions in a timely fashion.”
ResponderEliminarDistressed Debt Trading
ResponderEliminarUnder "London Rules" - essentially unspoken rules in a default where money center banks wouldn't take a haircut, they would extend principal and make the interest virtually zero. Because of this,lenders rarely sold,in contrast to the U.S.
Now, for the first time, lenders are starting to sell. It is accounting driven. Banks will not take a book loss.
We “local savers” have to push for special protection, because local retail savers were not part of the problem but must be part of the solution. With a proper orderly restructuring it is technically , though not politically, easy to segment and discriminate among investors, and it is in fact essential in my experience. I worked through the Latin American debt crises in Argentina and Mexico in the 1980’s, so I’m basing my recommendation on actual experience. Please see also my short articles on Debt Workout 101- orderly default http://ppplusofonia.blogspot.com/2011/09/debt-workout-101-games-borrowers-and_13.html
ResponderEliminarIt is normal do discriminate between creditors in a debt workout and restructuring situation:
- existing versus new bondholders, existing bondholders suffer a discount, bondholders get a premium do provide new money
- local (currency, law ) versus foreign (currency, law) bondholders, traditionally only the foreign bondholders suffered discounts, the local bondholders suffered everything else, including higher taxes and recession
- wholesale investors versus retail savers and investors, wholesale professional investors suffer a discount, retail investors are protected up to a certain amount, €100.000-€200.000; retail investors include families but also local corporate
- easily identified bank lenders and anonymous holders of traded instruments such as bonds, banks can be required to refinance, bondholders may not even be identified
- etc
See a game theory of the the Eurozone credit crisis in FT Alphaville
ResponderEliminarhttp://ftalphaville.ft.com/blog/2012/06/06/1030341/when-strategy-is-mistaken-for-stupidity-the-curious-case-of-eurozone-politicians/
A única forma de um devedor partilhar a perda equitativamente com os seus credores é fazendo um default e suspensão de pagamento, assim que se tornar inevitable.
ResponderEliminar