TY  - JOUR
AU  - Bolton,Patrick
AU  - Jeanne,Olivier
TI  - Structuring and Restructuring Sovereign Debt: The Role of Seniority
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 11071
PY  - 2005
Y2  - January 2005
UR  - http://www.nber.org/papers/w11071
L1  - http://www.nber.org/papers/w11071.pdf
N1  - Author contact info:
Patrick Bolton
Columbia Business School
804 Uris Hall
New York, NY 10027
Tel: 212/854-9245
Fax: 212/854-8059
E-Mail: pb2208@columbia.edu

Olivier Jeanne
Department of Economics
Johns Hopkins University
454 Mergenthaler Hall
3400 N. Charles Street
Baltimore, MD 21218
Tel: 410/516-7604
Fax: 410/516-7600
E-Mail: ojeanne@jhu.edu
AB  - In an environment characterized by weak contractual enforcement, sovereign lenders can enhance the likelihood of repayment by making their claims more difficult to restructure. We show within a simple model how competition for repayment between lenders may result in sovereign debt that is excessively difficult to restructure in equilibrium. Alleviating this inefficiency requires a sovereign debt restructuring mechanism that fulfills some of the functions of corporate bankruptcy regimes, in particular the enforcement of seniority and subordination clauses in debt contracts.
ER  -