Valuation of Menu items in Debt Restructuring [electronic resource]
Material type: TextSeries: IMF Working Papers; Working Paper ; No. 89/69Publication details: Washington, D.C. : International Monetary Fund, 1989Description: 1 online resource (16 p.)ISBN: 1451960603 :ISSN: 1018-5941Subject(s): Debt Reduction | Debt Restructuring | Debtor Country | Net Debt | Present ValueAdditional physical formats: Print Version:: Valuation of Menu items in Debt RestructuringOnline resources: IMF e-Library | IMF Book Store Abstract: This paper outlines a procedure for calculating the cash value of "menu items" in debt restructuring proposals, including par and non-par exchanges, with enhancements consisting of either interest or principal guarantees. It is argued that under certain plausible assumptions interest and principal guarantees are directly equivalent to cash buy-backs. Using these assumptions, formulas to calculate the exchange ratios, resource requirements, interest rates, and net debt reduction for particular menu items are derived. It is shown that there is not a direct relationship between the exchange discount and the market price.This paper outlines a procedure for calculating the cash value of "menu items" in debt restructuring proposals, including par and non-par exchanges, with enhancements consisting of either interest or principal guarantees. It is argued that under certain plausible assumptions interest and principal guarantees are directly equivalent to cash buy-backs. Using these assumptions, formulas to calculate the exchange ratios, resource requirements, interest rates, and net debt reduction for particular menu items are derived. It is shown that there is not a direct relationship between the exchange discount and the market price.
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