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Government Involvement in Corporate Debt Restructuring: Case Studies from the Great Recession
Author:
Mr. David A. Grigorian
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Ms. Faezeh Raei
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Series:
IMF Working Papers
Volume/Issue:
Volume 2010: Issue 260
Language:
English
Publication Date:
01 Nov 2010
DOI:
https://doi.org/10.5089/9781455209606.001
ISBN:
9781455209606
ISSN:
1018-5941
Pages:
34
Keywords:
WP; banking sector; financial support; foreign currency; balance sheet
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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The paper examines recent episodes of government involvement in corporate debt restructurings. It argues that corporate debt restructuring is an important step toward recovery from a financial crisis. We then discuss the rationale for, and modalities of, the state intervention in corporate debt workouts through reviewing six countries with large scale corporate debt workouts. Case studies reveal that the costs of corporate sector rescue are significant and in several cases on par with the costs of financial sector bailouts. The paper sheds light on the importance of contingent liabilities and associated risks to government balance sheet from the corporate debt side and emphasizes the need for improved contingency planning for corporations with potential systemic impact.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund