Mexican Debt Exchange: Lessons and Issues
- Peter Wickham, Jacob Frenkel, and Michael Dooley
- Published Date:
- March 1989
- DAVID FOLKERTS-LANDAU and CARLOS ALFREDO RODRIGUEZ*
Mexico undertook its first debt-exchange program—an exchange of discounted restructured loan debt for new bonds with improved debt-service characteristics—in early 1988. The rate at which old restructured debt was exchanged for the new bonds was determined in an auction; this note analyzes the outcome of the auction and the valuation of the new bonds with a simple asset pricing model and data from the secondary market for restructured loans.