Annex I: Evaluation of Debt Exchanges

The buy-back equivalent price (BEP) is defined as the ratio of the upfront costs associated with a given debt operation to the amount of debt and debt-service reduction achieved through that operation. This measure provides a convenient benchmark for assessing the relative efficiency of alternative options within a menu, and for comparing the overall terms of a package with conditions in the secondary market. For example, if the buy-back equivalent price of an option in a given menu is lower than the prevailing secondary market price, the debtor is able to obtain more debt or debt-service reduction through the option than would have been possible by using the same amount of resources for a buy-back at the prevailing secondary market price.

Calculating the BEP is relatively straightforward. It is the ratio of the initial costs of the operation to the expected amount of reduction in contractual claims payable by the debtors to banks.

BEP = Cost/ Debt Reduction,

where

$\begin{array}{ccc}\mathrm{Cost}& =& \mathrm{Cost}\mathrm{of}\mathrm{guarentees}\mathrm{for}\mathrm{principal}\mathrm{and}\mathrm{interest}\hfill \\ & +& \mathrm{Cast}\mathrm{for}\mathrm{downpayments}\mathrm{and}\mathrm{buy}-\mathrm{backs}\hfill \end{array}$

$\begin{array}{ccc}\mathrm{Dept}\mathrm{Reduction}& =& \mathrm{Debt}\mathrm{cancelled}\mathrm{through}\mathrm{downpayments}\mathrm{and}\mathrm{buy}-\mathrm{backs}\hfill \\ & +& \mathrm{Debt}\mathrm{canceled}\mathrm{through}\mathrm{discounts}\hfill \\ & +& \mathrm{Present}\mathrm{value}\mathrm{of}\mathrm{debt}-\mathrm{service}\mathrm{reduction}\hfill \\ & +& \mathrm{Prepayments}\mathrm{of}\mathrm{principal}\mathrm{and}/\mathrm{or}\mathrm{interest}\mathrm{through}\mathrm{guarantee}\mathrm{accounts}\hfill \end{array}$

The initial costs would include the cost of funding any principal and/or interest guarantees required under the terms of a given debt exchange. To obtain a summary statistic for a whole menu, cost calculations would also include any associated downpayments against arrears, as well as upfront costs for any buy-backs included in the menu. The reduction in contractual claims is the sum of the outright reduction in claims implied by the operation (that is, for a buy-back, the amount of debt repurchased; in the case of a discount exchange, the discount multiplied by the amount of debt exchanged; and in the case of a par exchange, the present value of the interest reduction) plus any effective prepayments of principal and interest resulting from the attachment of the guarantee accounts to the new instruments. In cases involving value recovery clauses, the estimated debt reduction should be adjusted downward by an estimate of the future payments arising from the provisions of the value recovery clause.

The inclusion of the guarantee accounts in the calculation of the reduction in contractual claims reflects the fact that if the debtor discharges its obligations on the new debt, the amounts committed to the guarantee accounts will be returned to the debtor. Thus, the debtor does not bear any further net cost corresponding to obligations covered by such a guarantee. With principal guarantees, the interest earned by the guarantees is reinvested so that when the amortization comes due, it can be paid out of the accumulated proceeds of the account. With rolling interest guarantees, the funds initially placed in escrow are typically returned only once the bond matures, but the debtor usually receives the interest earned by the guarantee account so long as it remains current on the debt. Therefore, the debtor again receives a stream of refunds equal in present value to the amount initially deposited.¹

To illustrate, consider the case of a discount exchange where $100 of old debt is exchanged for $65 of new bonds backed by principal and interest guarantees which cost $6.5 and $8.5, respectively, to fund. The total cost is $15 while the debt reduction achieved is $35 (= $100 ‒ 65) + $15 or $50, since the $15 will ultimately be returned to the debtor with interest if the debtor services the $65 of new debt. Hence, the BEP would be 15 divided by 50, giving 30 cents. At a price of 30 cents, a similar $50 debt cancellation could be achieved through a buy-back at a cost of $15.

In cases where debt relief is obtained through the establishment of a fixed sub-market interest rate (or interest rate path), the amount of debt reduction depends on the future path of interest rates. Estimation of the expected amount of debt reduction ex ante then requires deriving a benchmark against which to compare the fixed interest rate path. Therefore, the amount of debt-service relief achieved includes an element of subjectivity. In the calculations presented in Table 2, the amount of interest reduction is calculated by comparing interest rates specified on the par bonds with the fixed interest rate the borrower would have attained if it had been able to convert its floating-rate obligations (paying LIBOR + ) into a long-term fixed-rate bond paying a similar premium over the long-term risk-free rate. Specifically, the interest reduction in a given period is calculated as the difference between the interest rate agreed for the period and the sum of the long-term bond yield prevailing when the agreement was reached, the prevailing per period market premium over the treasury yield for converting floating-rate debt to fixed-rate debt, and the spread over LIBOR prevailing on the old syndicated debt (usually ). This difference is then discounted to the present at the long-term risk-free bond rate and aggregated with the differences for all the other periods to arrive at the overall degree of interest relief.

It is important to recognize that while buy-backs and debt exchanges are similar, in that they involve upfront costs for the debtor and result in lower debt or debt-service obligations, they differ in a number of important respects that are not captured by the concept of buy-back equivalence. The debt exchange entails the rescheduling of the debtor’s remaining obligations, sometimes over a period as long as thirty years, and their transformation from syndicated loans into less easily rescheduled securities. Also, in some cases, the obligations are changed from floating- to fixed-rate obligations—reducing the debtor’s exposure to interest risk—and additional obligations contingent on export performance or growth may be introduced. Moreover, debt exchanges differ since they preserve a portion of creditors’ claims, whereas buy-backs can potentially be used to retire all of a given exposure. These differences can have important implications for the appropriateness of a given option or menu for a country’s circumstances. It is not necessarily the case that an option with a lower BEP is better for borrowers (or worse for creditors) than one with a higher BEP, and vice versa.

Annex II Stripped Prices

The existence of a discount on the secondary market for a bank claim on a sovereign borrower reflects the market’s perception of a risk that the claim will not be serviced. Accordingly, the secondary market price for a country’s bank debt provides a broad indicator of a country’s creditworthiness. The interpretation of secondary market prices is complicated, however, after a bank claim has been restructured and securitized. In particular, the secondary market price of a partially collateralized discount or par bond reflects not only the market’s assessment of the likelihood the borrower will service the claim, but also the incremental value that creditors expect to receive from the associated guarantee. Moreover, in the case of a reduced-interest par bond, the price reflects the degree of interest reduction compared with prevailing market rates. Hence, to construct a measure of the country’s perceived payment risk, it is necessary to “strip off” the contribution to the bond’s market value by the attachment of a payment guarantee, and to normalize the price for the degree of interest reduction.

The approach to “stripping” adopted here is based on the realization that a partially collateralized security can be characterized as a portfolio of two different payment streams: one that is guaranteed and carries no default risk, and another that is unguaranteed and subject to country risk. By subtracting the value of the guaranteed obligations from the secondary market price, one can derive the market value of the “risky” claims. The stripped price, a measure of a country’s perceived payment risk, is subsequently derived from the ratio of the market value of the risky claims to their hypothetical value in the absence of payment risk. As a result of this “normalization,” stripped prices are comparable across different types of instruments.

Turning to the actual calculations, the stripped price (p_s) is defined as the ratio of the market value of the risky payment obligations (MV_r) to the present value of these same obligations (PV_r).²

$\begin{array}{cc}{p}_s={\mathit{MV}}_r/{\mathit{PV}}_r\mathrm{.}& \begin{array}{cc}& \left(1\right)\end{array}\end{array}$

The market value of the risky obligations is estimated by subtracting the current value of the collaterals MV_c (the present discounted value of the future income stream that creditors expect to receive directly or indirectly from the collateral account) from the observed market value of the bond (MV_b), that is,

$\begin{array}{cc}{\mathit{MV}}_r={\mathit{MV}}_b-{\mathit{MV}}_c\mathrm{.}& \begin{array}{cc}& (2)\end{array}\end{array}$

Similarly, the present value of the risky obligations is estimated by calculating the present value of the total obligations on the bond less the present discounted value of the obligations covered by the principal guarantee:

$\begin{array}{cc}{\mathit{PV}}_r={\mathit{PV}}_b-{\mathit{PV}}_c\mathrm{.}& \begin{array}{cc}& (3)\end{array}\end{array}$

Since the prepaid obligations are riskless, their present discounted value equals their market value. Hence,

$\begin{array}{cc}{\mathit{PV}}_r={\mathit{PV}}_b-{\mathit{MV}}_c\mathrm{.}& \begin{array}{cc}& (4)\end{array}\end{array}$

Combining equations (1), (2), and (4) gives the result:

$\begin{array}{cc}{P}_s=\frac{({\mathit{MV}}_b-{\mathit{MV}}_c)}{({\mathit{PV}}_b-{\mathit{MV}}_c)}\mathrm{.}& \begin{array}{cc}& \left(5\right)\end{array}\end{array}$

If the stripped price equals one, this implies that MV_b = PV_b, that is, the borrower could issue new debt with a maturity similar to the bond with a yield equal to the market discount rate.

Movements in market interest rates will be reflected in the price of the bond to the extent that they affect the value of the guarantees and the present value of the obligations. However, such movements will affect the stripped price only to the extent that they change the country’s perceived payment risk. For example, an increase in market interest rates will decrease the value of the principal guarantee which, other things being equal, should decrease the market value of the bond. Similarly, higher market interest rates should lower the present value of a fixed interest par bond, and thus decrease the hypothetical present value of the bond. The stripped price should not, however, be directly affected by changes in the value of the guarantee or the present value of the bond.

Stripped prices are more volatile than the quoted market price of the bond. Movements in stripped prices only affect the value of the risky component of the bond; the value of the payment guarantee remains unaffected. Thus, movements in stripped prices affect the value of the bond less than proportionally. The degree of correlation between the bond’s market price and the stripped price is inversely related to the share of the value of the bond covered by the payment guarantee.

Statistical Appendix

^{Table A1.}

Amounts of Medium- and Long-Term Bank Debt Restructured, 1985–September 1992¹

(In millions of U.S. dollars; by year of agreement in principle)

Sources: Restructuring agreements, and IMF staff estimates.

¹Including short-term debt converted into long-term debt and debt exchanges involving interest or principal reduction. Amounts represent face value of old claims restructured. Does not include the March 1991 preliminary agreement with Nigeria and the May 1991 arrears agreement with Brazil.

²Multiyear rescheduling agreement (MYRA) entailing the restructuring of all eligible debt outstanding as of a certain date.

³Financing packages involving debt and debt-service reduction.

⁴Estimates of eligible debt.

⁵Excluding $9.6 billion in deferments corresponding to maturities due in 1986.

⁶Amendments to previous restructuring agreements.

⁷Deferment agreement.

⁸Agreements in 1985 and 1987 modified debt-service profiles on debt rescheduled under the 1984 agreements; the amounts involved are not shown because repayments made during 1985–87 have not been identified.

⁹Agreement was reached with creditor banks in this year to amend certain terms of previous restructuring agreements. The amounts involved, however, were not modified in relation to those shown for the previous year.

¹⁰Face value of debt extinguished in buy-back.

¹¹Totals exclude amounts deferred, given in parentheses.

^{Table A1.}

Amounts of Medium- and Long-Term Bank Debt Restructured, 1985–September 1992¹

(In millions of U.S. dollars; by year of agreement in principle)

		1985		1986		1987		1988		1989		1990		1991		1992 First Three Quarters
Argentina		—		—		29,500	2	—		—		—		—		30,950	3,4
Bolivia		—		—		473	3	—		—		—		—		200	3,4
Brazil		—		6,671	5	—		61,000	2	—		—		—		49,300	3,4
Chile		6,007		—		5,902	2	—		—		1,800	6	—		—
Congo		—		217		—		—		—		—		—		—
Costa Rica		440		—		—		—		1,570	3	—		—		—
Côte d’lvoire		—		691	2	—		2,211	2	—		—		—		—
Dominican Republic		787	2	—		—		—		—		—		—		—
Ecuador		4,683	2	—		—		—		—		—		—		—
Gabon		—		—		39		—		—		—		157		—
Gambia, The		—		—		19		—		—		—		—		—
Guinea		—		—		43		—		—		—		—		—
Guyana		(47)	7	(57)	7	—		—		—		—		—		103
Honduras		—		—		248	2	—		132	2	—		—		—
Jamaica		195		—		285	2	—		—		332		—		—
Jordan		—		—		—		—		—		—		—		—
Madagascar		…	8	—		…	8	—		—		21		—		—
Malawi		—		—		—		35	2	—		—		—		—
Mexico		(950)	9	43,700	2	—		3,671	3	48,231	3	—		—		—
Morocco		538		2,174		—		—		—		3,150		—		—
Mozambique		—		—		253	3	—		—		—		124	10	—
Nicaragua		—		—		—		—		—		—		—		—
Niger		—		52		—		—		—		—		111	10	—
Nigeria		—		4,250		—		5,824	2	—		—		5,811	3	—
Panama		579		—		—		—		—		—		—		—
Peru		—		—		—		—		—		—		—		—
Philippines		—		—		9,010	2	—		781		1339	10	4,800	3,4	—
Poland		—		1,970		8,441	2	—		(351)	7	—		—		—
Romania		—		800		—		—		—		—		—		—
Senegal		20		—		—		—		—		37		—		—
Sierra Leone		—		—		—		—		—		—		—		—
South Africa		—		(9,800)	7	10,900	2	—		—		—		—		—
Sudan		920		—		—		—		—		—		—		—
Togo		—		—		—		49	2	—		—		—		—
Trinidad and Tobago		—		—		—		470	2	—		—		—		—
Uruguay		1,958	2	—		1,770	2	—		—		1,608	3	—		—
Venezuela		—		—		20,338	2	—		—		19,700	3	—		—
Yugoslavia		4,012	2	—		—		6,895	2	—		—		—		—
Zaïre		(61)	7	(65)	7	(61)	7	—	(61)	7	—		—		—
Zambia		—		—		—		—		—		—		—		—
	Total11	20,139		60,525		87,221		80,155		50,714		27,987		11,003		80,553

Sources: Restructuring agreements, and IMF staff estimates.

¹Including short-term debt converted into long-term debt and debt exchanges involving interest or principal reduction. Amounts represent face value of old claims restructured. Does not include the March 1991 preliminary agreement with Nigeria and the May 1991 arrears agreement with Brazil.

²Multiyear rescheduling agreement (MYRA) entailing the restructuring of all eligible debt outstanding as of a certain date.

³Financing packages involving debt and debt-service reduction.

⁴Estimates of eligible debt.

⁵Excluding $9.6 billion in deferments corresponding to maturities due in 1986.

⁶Amendments to previous restructuring agreements.

⁷Deferment agreement.

⁸Agreements in 1985 and 1987 modified debt-service profiles on debt rescheduled under the 1984 agreements; the amounts involved are not shown because repayments made during 1985–87 have not been identified.

⁹Agreement was reached with creditor banks in this year to amend certain terms of previous restructuring agreements. The amounts involved, however, were not modified in relation to those shown for the previous year.

¹⁰Face value of debt extinguished in buy-back.

¹¹Totals exclude amounts deferred, given in parentheses.

View Table

^{Table A1.}

Amounts of Medium- and Long-Term Bank Debt Restructured, 1985–September 1992¹

(In millions of U.S. dollars; by year of agreement in principle)

		1985		1986		1987		1988		1989		1990		1991		1992 First Three Quarters
Argentina		—		—		29,500	2	—		—		—		—		30,950	3,4
Bolivia		—		—		473	3	—		—		—		—		200	3,4
Brazil		—		6,671	5	—		61,000	2	—		—		—		49,300	3,4
Chile		6,007		—		5,902	2	—		—		1,800	6	—		—
Congo		—		217		—		—		—		—		—		—
Costa Rica		440		—		—		—		1,570	3	—		—		—
Côte d’lvoire		—		691	2	—		2,211	2	—		—		—		—
Dominican Republic		787	2	—		—		—		—		—		—		—
Ecuador		4,683	2	—		—		—		—		—		—		—
Gabon		—		—		39		—		—		—		157		—
Gambia, The		—		—		19		—		—		—		—		—
Guinea		—		—		43		—		—		—		—		—
Guyana		(47)	7	(57)	7	—		—		—		—		—		103
Honduras		—		—		248	2	—		132	2	—		—		—
Jamaica		195		—		285	2	—		—		332		—		—
Jordan		—		—		—		—		—		—		—		—
Madagascar		…	8	—		…	8	—		—		21		—		—
Malawi		—		—		—		35	2	—		—		—		—
Mexico		(950)	9	43,700	2	—		3,671	3	48,231	3	—		—		—
Morocco		538		2,174		—		—		—		3,150		—		—
Mozambique		—		—		253	3	—		—		—		124	10	—
Nicaragua		—		—		—		—		—		—		—		—
Niger		—		52		—		—		—		—		111	10	—
Nigeria		—		4,250		—		5,824	2	—		—		5,811	3	—
Panama		579		—		—		—		—		—		—		—
Peru		—		—		—		—		—		—		—		—
Philippines		—		—		9,010	2	—		781		1339	10	4,800	3,4	—
Poland		—		1,970		8,441	2	—		(351)	7	—		—		—
Romania		—		800		—		—		—		—		—		—
Senegal		20		—		—		—		—		37		—		—
Sierra Leone		—		—		—		—		—		—		—		—
South Africa		—		(9,800)	7	10,900	2	—		—		—		—		—
Sudan		920		—		—		—		—		—		—		—
Togo		—		—		—		49	2	—		—		—		—
Trinidad and Tobago		—		—		—		470	2	—		—		—		—
Uruguay		1,958	2	—		1,770	2	—		—		1,608	3	—		—
Venezuela		—		—		20,338	2	—		—		19,700	3	—		—
Yugoslavia		4,012	2	—		—		6,895	2	—		—		—		—
Zaïre		(61)	7	(65)	7	(61)	7	—	(61)	7	—		—		—
Zambia		—		—		—		—		—		—		—		—
	Total11	20,139		60,525		87,221		80,155		50,714		27,987		11,003		80,553

Sources: Restructuring agreements, and IMF staff estimates.

¹Including short-term debt converted into long-term debt and debt exchanges involving interest or principal reduction. Amounts represent face value of old claims restructured. Does not include the March 1991 preliminary agreement with Nigeria and the May 1991 arrears agreement with Brazil.

²Multiyear rescheduling agreement (MYRA) entailing the restructuring of all eligible debt outstanding as of a certain date.

³Financing packages involving debt and debt-service reduction.

⁴Estimates of eligible debt.

⁵Excluding $9.6 billion in deferments corresponding to maturities due in 1986.

⁶Amendments to previous restructuring agreements.

⁷Deferment agreement.

⁸Agreements in 1985 and 1987 modified debt-service profiles on debt rescheduled under the 1984 agreements; the amounts involved are not shown because repayments made during 1985–87 have not been identified.

⁹Agreement was reached with creditor banks in this year to amend certain terms of previous restructuring agreements. The amounts involved, however, were not modified in relation to those shown for the previous year.

¹⁰Face value of debt extinguished in buy-back.

¹¹Totals exclude amounts deferred, given in parentheses.

^{Table A2.}

Terms and Conditions of Bank Debt Restructurings and Financial Packages, 1989–September 1992¹

Sources: Restructuring agreements, and IMF staff estimates.

¹Arrangements approved in principle before January 1, 1989 are reported in previous background papers.

²Voluntary amortization payments made during the grace period would be matched on a 1:1 basis by debt forgiveness (equivalent to a buy-back option at 50 cents on the dollar).

³Interest rate would be increased by a maximum of 3 percentage points if GDP growth exceeds a threshold rate.

⁴Seventy percent of these arrears to be forgiven in 1990 upon downpayment equal to 5 percent of these arrears. Beginning at the end of 1990 and provided that Honduras remains current on interest due on all rescheduled amounts under the agreement, the creditor bank would further forgive interest arrears by a yearly amount equal to 5 percent of the arrears outstanding at end-October 1989.

⁵New money options include medium-term loan, new money bonds, on-lending facility, and medium-term trade facility. As of end-March 1992, $952 million had been disbursed.

⁶Includes $112 million of previously capitalized interest arrears on letters of credit.

⁷Allowance for re-lending for up to 366 days of up to 20 percent of the new money on a revolving basis, of which one half would be available in any one calendar year and one half would be available to the private sector.

⁸Committed to the new money option at end-June 1992, with 95 percent of eligible debt tendered under the package.

⁹Payment is to be deferred until December 30, 1991. Alternatively, banks may receive payments according to the original schedule in return for an equal increase in the short-term revolving trade facility.

¹⁰Payment was deferred until the second quarter of 1990.

¹¹The interest rate of LIBOR plus ⅞ applies to the new money bonds issued by the central bank (as opposed to the Republic of Venezuela).

^{Table A2.}

Terms and Conditions of Bank Debt Restructurings and Financial Packages, 1989–September 1992¹

Country, Date of Agreement, and Type of Debt Rescheduled					Basis	Amount Provided	Grace Period	Maturity	Interest Rate
						(In millions of U.S. dollars)	(In years, unless otherwise noted)		(In percent spread over LIBOR/U.S. prime, unless otherwise noted)
Argentina
	Preliminary agreement on April 7; term sheet June 23, 1992
			Collateralized debt exchange		Debt reduction (Table A3)
Bolivia
	Agreement in principle of April 1992; term sheet on July 10, 1992
			Waiver to allow debt buy-back and exchanges		Debt reduction (Table A3)
Brazil
	Preliminary agreement on July 8, 1992; term sheet on September 22, 1992				Old debt (equal to 5.5 times the new money provided) to be exchanged at par for new noncollateralized bonds.	…	7	15	⅞
		New money bonds
		Restructuring loan			Difference between interest rate in years 1–6 and LIBOR plus to be capitalized.	…	10	20	years 1–2: 4 percent years 3–4: 4.5 percent years 5–6: 5 percent years 7–20:
		Capitalization bond			Difference between interest rate in years 1–6 and 8 percent to be capitalized. Back-loaded amortization schedule.	…	10	20	years 1–2: 4 percent years 3–4: 4.5 percent years 5–6: 5 percent years 7–20: 8 percent
		Collateralized debt exchanges			Debt reduction (Table A3)
Costa Rica
	Preliminary agreement of November 16, 1989; final agreement on May 21, 1990				Debt reduction (Table A3)
Gabon
	Agreement in principle of December 11, 1991; final agreement on Mav 12, 1992:
			Rescheduling of principal due January 1, 1989–December 31, 1992.		100 percent of principal	157	3	13	⅞
Guyana
	Agreement on term sheet on August 27, 1992				Debt reduction (Table A3)
Honduras
	Agreements of August 17, 1989
		Bilateral concessional rescheduling of debt to Lloyds Bank
				Principal outstanding at end-October 1989	100 percent	462	7	20	6.25 percent fixed rate3
				Interest arrears at end-October 1989	100 percent	222,4	7	20	6.25 percent fixed rate3
		Bilateral concessional rescheduling of debt to Bank of America
				Principal outstanding	100 percent	472	10	20	6.5 percent
				Interest arrears at end-October 1989	100 percent	174	⅔	20	4 percent fixed rate
Jamaica
	Agreement of June 26, 1990
		Refinancing of debt previously rescheduled in 1987
			Tranche A		100 percent of principal	144	—	10½
			Tranche B		100 percent of principal	188	8	14½
Jordan
	Agreement in principle of November 20, 1989
		Restructuring of medium-term loans maturing between January 1, 1989 and June 30, 1991			100 percent of principal	580	5	11½
		New medium-term money facility			New money	50	3	3
Madagascar
	Agreement in principle in October 1989 and signed on Anril 10, 1990
			Rescheduling		100 percent of principal falling due on December 15, 1989, and 50 percent of principal falling due in 1990–93.	21.1	3½	9	⅞−1
Mexico
	Agreement of February 4, 1990
		New money facility			New money	1,0905	7	15
		Collateralized debt exchanges			Debt reduction (Table A3)
		Restructuring of maturities of eligible debt not subject to debt and debt-service reduction			100 percent of principal	6,400	7	15
Morocco
	Agreement in principle of April 1990; final agreement of September 1990
			Restructuring of the entire debt outstanding at end-1989		100 percent of pre-cutoff debt	3,150	7–10	15–20
			Debt buy-backs authorized
Mozambique
	Agreement in principle of November 1, 1991; operation completed December 27, 1991
			Waivers to allow debt buy-back		Debt reduction (Table A3)
Niger
	Agreement in principle of January 14, 1991; operation completed March 8, 1991
			Waivers to allow debt buy-back		Debt reduction (Table A3)
Nigeria
	Agreement in principle September 1988; final agreement April 1989
			Restructuring of debt outstanding at end-1987
				Not previously rescheduled medium-term debt	100 percent of principal	1,256	3	20	⅞
				Debt covered by the November 1987 rescheduling agreement	100 percent of principal	1,635	3	20	⅞
				Debt (letters of credit) covered by the November 1987 refinancing agreement	Arrears on interest, fees, and commissions on letters of credit.	2,448	3	15
					100 percent	4906	—	3	non-interest-bearing
	Agreement in principle March 1991; final agreement December 20, 1991, and closing of agreement January 21, 1992
			New money bond exchange		Banks would provide new money in an amount equivalent to 20 percent of debts exchanged for noncollateralized new bonds.	—	7	15	1
	Buy-back and debt exchange				Debt reduction (Table A3)
Philippines
	Agreement in principle October 1989; final agreement February 1990
			New money bonds or loans7		New money	710	8	15
			Rescheduling of maturities falling due in 1990-93		100 percent of principal	781	8	15
			Change in spread on previously restructured debt		—	Unchanged	Unchanged	Unchanged
			Waivers to allow debt buy-backs and exchanges		Debt reduction (Table A3)
	Preliminary agreement August 1991; term sheet February 1992, final agreement July 1992
				New money bonds	Old debt (equal to four times the new money provided) to be exchanged at par bond for new noncollateralized bonds.	1298	5	17
	Collateralized debt exchanges				Debt reduction (Table A3)
Poland
	Agreement in principle of June 16, 1989
			Deferment of amortization payments falling due between May 1989 and December 19909		100 percent	206	…	…	Unchanged
	Agreement in principle of October 1989
			Rescheduling of interest falling due in the fourth quarter of 198910		85 percent	145	…	…
Senegal
	Agreement of September 1990					37	—	9	⅞
Trinidad and Tobago
	Agreement in principle of November 1988; final agreement December 1989
			Medium- and long-term maturities falling due September 1, 1988–August31, 1992		100 percent of principal	446	4½	12½
Uruguay
	Agreement in principle of November 1990; final agreement January 1991
			New Money Bond Exchange		20 percent increase in exposure via purchase of new bonds would entitle banks to exchange at par old debt for noncollateralized “debt conversion notes.”	89	7	15	1.0
			Buy-back and debt exchange		Debt reduction (Table A3)
Venezuela
	Agreement in principle of March 20, 1990; final term sheet of June 25. 1990: final agreement of December 5. 1990
			New money bond exchange		Old debt (equal to five times the new money provided) to be exchanged at par for new, noncollateralized bonds.	1,197	7	15	1 and ⅞11
			Collateralized debt exchanges		Debt reduction (Table A3)

Sources: Restructuring agreements, and IMF staff estimates.

¹Arrangements approved in principle before January 1, 1989 are reported in previous background papers.

²Voluntary amortization payments made during the grace period would be matched on a 1:1 basis by debt forgiveness (equivalent to a buy-back option at 50 cents on the dollar).

³Interest rate would be increased by a maximum of 3 percentage points if GDP growth exceeds a threshold rate.

⁴Seventy percent of these arrears to be forgiven in 1990 upon downpayment equal to 5 percent of these arrears. Beginning at the end of 1990 and provided that Honduras remains current on interest due on all rescheduled amounts under the agreement, the creditor bank would further forgive interest arrears by a yearly amount equal to 5 percent of the arrears outstanding at end-October 1989.

⁵New money options include medium-term loan, new money bonds, on-lending facility, and medium-term trade facility. As of end-March 1992, $952 million had been disbursed.

⁶Includes $112 million of previously capitalized interest arrears on letters of credit.

⁷Allowance for re-lending for up to 366 days of up to 20 percent of the new money on a revolving basis, of which one half would be available in any one calendar year and one half would be available to the private sector.

⁸Committed to the new money option at end-June 1992, with 95 percent of eligible debt tendered under the package.

⁹Payment is to be deferred until December 30, 1991. Alternatively, banks may receive payments according to the original schedule in return for an equal increase in the short-term revolving trade facility.

¹⁰Payment was deferred until the second quarter of 1990.

¹¹The interest rate of LIBOR plus ⅞ applies to the new money bonds issued by the central bank (as opposed to the Republic of Venezuela).

View Table

^{Table A2.}

Terms and Conditions of Bank Debt Restructurings and Financial Packages, 1989–September 1992¹

Country, Date of Agreement, and Type of Debt Rescheduled					Basis	Amount Provided	Grace Period	Maturity	Interest Rate
						(In millions of U.S. dollars)	(In years, unless otherwise noted)		(In percent spread over LIBOR/U.S. prime, unless otherwise noted)
Argentina
	Preliminary agreement on April 7; term sheet June 23, 1992
			Collateralized debt exchange		Debt reduction (Table A3)
Bolivia
	Agreement in principle of April 1992; term sheet on July 10, 1992
			Waiver to allow debt buy-back and exchanges		Debt reduction (Table A3)
Brazil
	Preliminary agreement on July 8, 1992; term sheet on September 22, 1992				Old debt (equal to 5.5 times the new money provided) to be exchanged at par for new noncollateralized bonds.	…	7	15	⅞
		New money bonds
		Restructuring loan			Difference between interest rate in years 1–6 and LIBOR plus to be capitalized.	…	10	20	years 1–2: 4 percent years 3–4: 4.5 percent years 5–6: 5 percent years 7–20:
		Capitalization bond			Difference between interest rate in years 1–6 and 8 percent to be capitalized. Back-loaded amortization schedule.	…	10	20	years 1–2: 4 percent years 3–4: 4.5 percent years 5–6: 5 percent years 7–20: 8 percent
		Collateralized debt exchanges			Debt reduction (Table A3)
Costa Rica
	Preliminary agreement of November 16, 1989; final agreement on May 21, 1990				Debt reduction (Table A3)
Gabon
	Agreement in principle of December 11, 1991; final agreement on Mav 12, 1992:
			Rescheduling of principal due January 1, 1989–December 31, 1992.		100 percent of principal	157	3	13	⅞
Guyana
	Agreement on term sheet on August 27, 1992				Debt reduction (Table A3)
Honduras
	Agreements of August 17, 1989
		Bilateral concessional rescheduling of debt to Lloyds Bank
				Principal outstanding at end-October 1989	100 percent	462	7	20	6.25 percent fixed rate3
				Interest arrears at end-October 1989	100 percent	222,4	7	20	6.25 percent fixed rate3
		Bilateral concessional rescheduling of debt to Bank of America
				Principal outstanding	100 percent	472	10	20	6.5 percent
				Interest arrears at end-October 1989	100 percent	174	⅔	20	4 percent fixed rate
Jamaica
	Agreement of June 26, 1990
		Refinancing of debt previously rescheduled in 1987
			Tranche A		100 percent of principal	144	—	10½
			Tranche B		100 percent of principal	188	8	14½
Jordan
	Agreement in principle of November 20, 1989
		Restructuring of medium-term loans maturing between January 1, 1989 and June 30, 1991			100 percent of principal	580	5	11½
		New medium-term money facility			New money	50	3	3
Madagascar
	Agreement in principle in October 1989 and signed on Anril 10, 1990
			Rescheduling		100 percent of principal falling due on December 15, 1989, and 50 percent of principal falling due in 1990–93.	21.1	3½	9	⅞−1
Mexico
	Agreement of February 4, 1990
		New money facility			New money	1,0905	7	15
		Collateralized debt exchanges			Debt reduction (Table A3)
		Restructuring of maturities of eligible debt not subject to debt and debt-service reduction			100 percent of principal	6,400	7	15
Morocco
	Agreement in principle of April 1990; final agreement of September 1990
			Restructuring of the entire debt outstanding at end-1989		100 percent of pre-cutoff debt	3,150	7–10	15–20
			Debt buy-backs authorized
Mozambique
	Agreement in principle of November 1, 1991; operation completed December 27, 1991
			Waivers to allow debt buy-back		Debt reduction (Table A3)
Niger
	Agreement in principle of January 14, 1991; operation completed March 8, 1991
			Waivers to allow debt buy-back		Debt reduction (Table A3)
Nigeria
	Agreement in principle September 1988; final agreement April 1989
			Restructuring of debt outstanding at end-1987
				Not previously rescheduled medium-term debt	100 percent of principal	1,256	3	20	⅞
				Debt covered by the November 1987 rescheduling agreement	100 percent of principal	1,635	3	20	⅞
				Debt (letters of credit) covered by the November 1987 refinancing agreement	Arrears on interest, fees, and commissions on letters of credit.	2,448	3	15
					100 percent	4906	—	3	non-interest-bearing
	Agreement in principle March 1991; final agreement December 20, 1991, and closing of agreement January 21, 1992
			New money bond exchange		Banks would provide new money in an amount equivalent to 20 percent of debts exchanged for noncollateralized new bonds.	—	7	15	1
	Buy-back and debt exchange				Debt reduction (Table A3)
Philippines
	Agreement in principle October 1989; final agreement February 1990
			New money bonds or loans7		New money	710	8	15
			Rescheduling of maturities falling due in 1990-93		100 percent of principal	781	8	15
			Change in spread on previously restructured debt		—	Unchanged	Unchanged	Unchanged
			Waivers to allow debt buy-backs and exchanges		Debt reduction (Table A3)
	Preliminary agreement August 1991; term sheet February 1992, final agreement July 1992
				New money bonds	Old debt (equal to four times the new money provided) to be exchanged at par bond for new noncollateralized bonds.	1298	5	17
	Collateralized debt exchanges				Debt reduction (Table A3)
Poland
	Agreement in principle of June 16, 1989
			Deferment of amortization payments falling due between May 1989 and December 19909		100 percent	206	…	…	Unchanged
	Agreement in principle of October 1989
			Rescheduling of interest falling due in the fourth quarter of 198910		85 percent	145	…	…
Senegal
	Agreement of September 1990					37	—	9	⅞
Trinidad and Tobago
	Agreement in principle of November 1988; final agreement December 1989
			Medium- and long-term maturities falling due September 1, 1988–August31, 1992		100 percent of principal	446	4½	12½
Uruguay
	Agreement in principle of November 1990; final agreement January 1991
			New Money Bond Exchange		20 percent increase in exposure via purchase of new bonds would entitle banks to exchange at par old debt for noncollateralized “debt conversion notes.”	89	7	15	1.0
			Buy-back and debt exchange		Debt reduction (Table A3)
Venezuela
	Agreement in principle of March 20, 1990; final term sheet of June 25. 1990: final agreement of December 5. 1990
			New money bond exchange		Old debt (equal to five times the new money provided) to be exchanged at par for new, noncollateralized bonds.	1,197	7	15	1 and ⅞11
			Collateralized debt exchanges		Debt reduction (Table A3)

Sources: Restructuring agreements, and IMF staff estimates.

¹Arrangements approved in principle before January 1, 1989 are reported in previous background papers.

²Voluntary amortization payments made during the grace period would be matched on a 1:1 basis by debt forgiveness (equivalent to a buy-back option at 50 cents on the dollar).

³Interest rate would be increased by a maximum of 3 percentage points if GDP growth exceeds a threshold rate.

⁴Seventy percent of these arrears to be forgiven in 1990 upon downpayment equal to 5 percent of these arrears. Beginning at the end of 1990 and provided that Honduras remains current on interest due on all rescheduled amounts under the agreement, the creditor bank would further forgive interest arrears by a yearly amount equal to 5 percent of the arrears outstanding at end-October 1989.

⁵New money options include medium-term loan, new money bonds, on-lending facility, and medium-term trade facility. As of end-March 1992, $952 million had been disbursed.

⁶Includes $112 million of previously capitalized interest arrears on letters of credit.

⁷Allowance for re-lending for up to 366 days of up to 20 percent of the new money on a revolving basis, of which one half would be available in any one calendar year and one half would be available to the private sector.

⁸Committed to the new money option at end-June 1992, with 95 percent of eligible debt tendered under the package.

⁹Payment is to be deferred until December 30, 1991. Alternatively, banks may receive payments according to the original schedule in return for an equal increase in the short-term revolving trade facility.

¹⁰Payment was deferred until the second quarter of 1990.

¹¹The interest rate of LIBOR plus ⅞ applies to the new money bonds issued by the central bank (as opposed to the Republic of Venezuela).