The Role of Intercreditor Equity in Sovereign Debt Restructuring

Abstract

Chapter 1 places the topic of intercreditor equity in the broader debate on sovereign debt restructuring. In a situation where there is no general insolvency framework, which is the case for sovereign debtors, disparate rules govern the restructuring process. Since this process is only binding for the creditors who voluntarily accept it, there are no clear answers as to what role equal and preferred treatment play in the restructuring. The effect of these rules can vary depending on the specific facts of a case, such as the type of creditors involved and the underlying factors of the economic crisis of the sovereign debtor. The chapter discusses the key roles that equal and differential treatment of creditors may have in sovereign debt restructuring, including how it affects the likelihood of reaching a sustainable debt burden.