TY  - JOUR
AU  - Bulow,Jeremy
AU  - Rogoff,Kenneth
TI  - Sovereign Debt Repurchases:  No Cure for Overhang
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 2850
PY  - 1989
Y2  - February 1989
UR  - http://www.nber.org/papers/w2850
L1  - http://www.nber.org/papers/w2850.pdf
N1  - Author contact info:
Jeremy I. Bulow
Stanford University
Graduate School of Business
Stanford, CA  94305-7298
Tel: 650/723-2160
Fax: 650/725-8916
E-Mail: jbulow@stanford.edu

Kenneth S. Rogoff
Thomas D Cabot Professor of Public Policy
Economics Department
Harvard University
Littauer Center 216
Cambridge, MA 02138-3001
Tel: 617-495-4022
Fax: 617/495-7730
E-Mail: krogoff@harvard.edu
AB  - We show, in a reasonably general model, that if a highly indebted country has good investment projects available to it, then it will not benefit from using any of its resources to buy back debt at market prices. Debt buybacks and debt-equity swaps only make sense for the country if these programs are heavily subsidized by creditors. This result holds for all buyback programs large and small, so long as they involve voluntary creditor participation and are not part of a larger deal including offsetting concessions from lenders. Our analysis therefore casts doubt on the popular argument that unilateral debt repurchases benefit HICs by relieving "debt overhang".
ER  -