PPP Lusofonia é um blog de economia e finanças, focado nos serviços públicos e no investimento para o desenvolvimento, especialmente em regime de PPP (Parcerias Publico Privadas).
O blog dedica-se a (a) conceitos de economia, finanças públicas e banca e financiamentos PPP (b) as necessidades dos PALOPs e (c)oportunidades de consultoria nos PALOPs.
(Public Private Partnerships and Development Financing in Portugal and Portuguese-speaking Countries)
Autora: Mariana Abrantes de Sousa
Sexta-feira, Setembro 02, 2011
Debt Workout 101 – games borrowers and lenders play
Debt Workout 101 - part 1 Here are some Sovereign/External Debt Workout Strategies for imprudent overleveraged irresponsible borrowers and their imprudent overextended irresponsible lenders.
First rule of debt workout: If you owe the bank 1.000€ and you can’t pay, you have a problem. If you owe 1.000.000€ and you can’t pay, the bank has a problem (add zeros as appropriate).
Bigger fool gambit: Creditors increase pricing, reduce tenors and refuse to refinance, increase demands for repayment as the borrower turn to other creditors or third-party guarantors, usually related (a rich uncle) or official creditors (Central Banks). Last creditor out is a rotten egg.
Asset grab: Creditors demand reinforcement of third party guarantees or collateral. Possession is nine-tenths of the law, but Watch out for invalid preferential transfers in the last few months before bankruptcy.
Small creditor gambit: Smaller creditors hold out for favourable treatment so that they don’t have to share in the creditor side sacrifices
All-in-this together gambit: Rapidly escalate local (borrower-side) problem into a systemic (creditor-side) problem, in order to get a favourable resolution from policymakers (or third-party guarantors), such as taxpayer bailout for the borrower and/or the creditors. This is a more transparent version of the “bigger-fool-gambit”.
Game of chicken: Borrowers pay late, threatenning to default, in order to overcome the creditors reluctance to modify loans conditions or to sell the loan assets at discount.
My Dad is stronger than yours: Bringing third and fourth parties to the debt renegotiation table, preferably heavy-duty entities like a major Shareholder or Stakeholder or even the Constitutional Courts, etc, in order to skew the loss-sharing in favour of either the imprudent borrower or the imprudent lender and their respective shareholdr / taxpayer. A slightly different version of this is "my streets are rowdier than yours". In either case, inflexibility and other uncooperative behaviour pays.
Don't look under the carpet, where all the hidden liabilites have been stashed...