Sovereign debt restructuring: The judge, the vultures and creditor rights

What role did the US courts play in the Argentine debt swap of 2005? What implications does this have for the future of creditor rights in sovereign bond markets? The Judge in the Argentine case has, it appears, deftly exploited creditor heterogeneity -between 'holdouts' seeking capital gains and institutional investors wanting a settlement -to promote a swap with a supermajority of creditors. Our analysis of Argentine debt litigation reveals a 'Judge-mediated' sovereign debt restructuring which resolves key issues of Transition and Aggregation -two of the tasks envisaged for the IMF's stillborn Sovereign Debt Restructuring Mechanism. For the future, we discuss how Judge-mediated sovereign debt restructuring (together with creditor committees) could complement Collective Action Clauses in sovereign bond contracts. © 2007 The Authors Journal compilation © Blackwell Publishing Ltd. 2007.