Sovereign Bailouts and Senior Loans

Institutional lending in crisis is evaluated from a theoretical point of view. First, the share of senior loans in new loans is irrelevant under a given probability distribution of the country's resources. Second, seniority may partially allev...

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Main Authors:	Chamley, Christophe, Pinto, Brian
Format:	Policy Research Working Paper
Language:	English en_US
Published:	World Bank, Washington, DC 2013
Subjects:	ARBITRAGE ASSETS BAILOUT BAILOUTS BALANCE SHEET BANKRUPTCY BOND BOND HOLDERS BOND SPREADS BONDHOLDERS BORROWER BORROWING BORROWING COST CENTRAL BANK CLAIM CLASS OF DEBT COMPETITIVE MARKETS CONTINGENT DEBT COST OF DEBT COUPON CREDIT MARKET CREDITOR DEBT DEBT CONTRACT DEBT CONTRACTS DEBT CRISES DEBT FORGIVENESS DEBT MATURITY DEBT PAYMENT DEBT PAYMENTS DEBT REDUCTION DEBT REDUCTIONS DEBT SERVICE DEBT SERVICE BURDEN DEBT SERVICING DEFAULT PENALTY DEFAULT PROBABILITIES DEFAULTS DEFICITS DEVELOPMENT POLICY DIVIDEND ECONOMIC HISTORY ECONOMIC THEORY EQUILIBRIUM EXPECTED RETURN EXPECTED VALUE EXTERNAL FINANCING FINANCIAL MARKET FINANCIAL MARKETS FINANCIAL SHOCK FINANCIAL STABILITY FINANCING REQUIREMENTS FISCAL EFFORTS FOREIGN LENDERS FOREIGN LOANS FORMAL ANALYSIS GDP GOVERNMENT BONDS INCOME INEFFICIENCY INSOLVENCY INSTITUTIONAL LOAN INSTITUTIONAL LOANS INTEREST RATE INTEREST RATES INTEREST REDUCTIONS INTERNATIONAL BANK INTERNATIONAL CRISIS LENDING IPOS JUNIOR DEBT LARGE CREDITORS LARGE NUMBER OF CREDITORS LENDER LENDERS LEVEL OF RISK LIQUIDITY LIQUIDITY CRISES LOAN CONTRACT LOAN RATE LOAN RATES LOAN REPAYMENT LONG-TERM DEBT LOW INTEREST RATE LOWER DEBT MARGINAL COST MARGINAL COST OF DEBT MARGINAL PRODUCTIVITY MARKET VALUE MORAL HAZARD NEGATIVE SHOCKS NEGOTIATION NEGOTIATIONS OLD BONDS OLD DEBT OPPORTUNITY COST OPTIMAL CONTRACTS PENALTY FOR DEFAULT PRIVATE CREDITORS PRIVATE DEBT PRIVATE INVESTORS PRIVATE LENDERS PRIVATE LENDING PRIVATE LOAN PRIVATE LOANS PRIVATE PARTIES PROBABILITY OF DEFAULT PUBLIC DEBT PUBLIC DEBT MANAGEMENT RATE OF RETURN REMEDY REPAYMENT REPAYMENT SCHEDULE REPUDIATION RETURN RISK-FREE INVESTMENT RISK-FREE RATE SENIOR BONDS SHORT-TERM DEBT SOVEREIGN DEBT SOVEREIGN LENDING STANDARD DEBT CONTRACT TAX TAXATION TOTAL DEBT
Online Access:	http://documents.worldbank.org/curated/en/2012/08/16631805/sovereign-bailouts-senior-loans http://hdl.handle.net/10986/12030

id	okr-10986-12030
recordtype	oai_dc
spelling	okr-10986-120302021-04-23T14:02:59Z Sovereign Bailouts and Senior Loans Chamley, Christophe Pinto, Brian ARBITRAGE ASSETS BAILOUT BAILOUTS BALANCE SHEET BANKRUPTCY BOND BOND HOLDERS BOND SPREADS BONDHOLDERS BORROWER BORROWING BORROWING COST CENTRAL BANK CLAIM CLASS OF DEBT COMPETITIVE MARKETS CONTINGENT DEBT COST OF DEBT COUPON CREDIT MARKET CREDITOR DEBT DEBT CONTRACT DEBT CONTRACTS DEBT CRISES DEBT FORGIVENESS DEBT MATURITY DEBT PAYMENT DEBT PAYMENTS DEBT REDUCTION DEBT REDUCTIONS DEBT SERVICE DEBT SERVICE BURDEN DEBT SERVICING DEFAULT PENALTY DEFAULT PROBABILITIES DEFAULTS DEFICITS DEVELOPMENT POLICY DIVIDEND ECONOMIC HISTORY ECONOMIC THEORY EQUILIBRIUM EXPECTED RETURN EXPECTED VALUE EXTERNAL FINANCING FINANCIAL MARKET FINANCIAL MARKETS FINANCIAL SHOCK FINANCIAL STABILITY FINANCING REQUIREMENTS FISCAL EFFORTS FOREIGN LENDERS FOREIGN LOANS FORMAL ANALYSIS GDP GOVERNMENT BONDS INCOME INEFFICIENCY INSOLVENCY INSTITUTIONAL LOAN INSTITUTIONAL LOANS INTEREST RATE INTEREST RATES INTEREST REDUCTIONS INTERNATIONAL BANK INTERNATIONAL CRISIS LENDING IPOS JUNIOR DEBT LARGE CREDITORS LARGE NUMBER OF CREDITORS LENDER LENDERS LEVEL OF RISK LIQUIDITY LIQUIDITY CRISES LOAN CONTRACT LOAN RATE LOAN RATES LOAN REPAYMENT LONG-TERM DEBT LOW INTEREST RATE LOWER DEBT MARGINAL COST MARGINAL COST OF DEBT MARGINAL PRODUCTIVITY MARKET VALUE MORAL HAZARD NEGATIVE SHOCKS NEGOTIATION NEGOTIATIONS OLD BONDS OLD DEBT OPPORTUNITY COST OPTIMAL CONTRACTS PENALTY FOR DEFAULT PRIVATE CREDITORS PRIVATE DEBT PRIVATE INVESTORS PRIVATE LENDERS PRIVATE LENDING PRIVATE LOAN PRIVATE LOANS PRIVATE PARTIES PROBABILITY OF DEFAULT PUBLIC DEBT PUBLIC DEBT MANAGEMENT RATE OF RETURN REMEDY REPAYMENT REPAYMENT SCHEDULE REPUDIATION RETURN RISK-FREE INVESTMENT RISK-FREE RATE SENIOR BONDS SHORT-TERM DEBT SOVEREIGN DEBT SOVEREIGN LENDING STANDARD DEBT CONTRACT TAX TAXATION TOTAL DEBT Institutional lending in crisis is evaluated from a theoretical point of view. First, the share of senior loans in new loans is irrelevant under a given probability distribution of the country's resources. Second, seniority may partially alleviate the inefficiency of debt contracts when the distribution of resources is endogenous to the country's physical investment and effort towards success. Third, with multiple lending rate equilibria, institutional lending may induce a switch to a lower private loan rate if it can be done in a sufficiently large amount. Fourth, conditions are analyzed under which debt forgiveness is efficient under a financial shock. 2013-01-02T19:56:42Z 2013-01-02T19:56:42Z 2012-08 http://documents.worldbank.org/curated/en/2012/08/16631805/sovereign-bailouts-senior-loans http://hdl.handle.net/10986/12030 English en_US Policy Research Working Paper; No. 6181 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank World Bank, Washington, DC Publications & Research :: Policy Research Working Paper Publications & Research
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	English en_US
topic	ARBITRAGE ASSETS BAILOUT BAILOUTS BALANCE SHEET BANKRUPTCY BOND BOND HOLDERS BOND SPREADS BONDHOLDERS BORROWER BORROWING BORROWING COST CENTRAL BANK CLAIM CLASS OF DEBT COMPETITIVE MARKETS CONTINGENT DEBT COST OF DEBT COUPON CREDIT MARKET CREDITOR DEBT DEBT CONTRACT DEBT CONTRACTS DEBT CRISES DEBT FORGIVENESS DEBT MATURITY DEBT PAYMENT DEBT PAYMENTS DEBT REDUCTION DEBT REDUCTIONS DEBT SERVICE DEBT SERVICE BURDEN DEBT SERVICING DEFAULT PENALTY DEFAULT PROBABILITIES DEFAULTS DEFICITS DEVELOPMENT POLICY DIVIDEND ECONOMIC HISTORY ECONOMIC THEORY EQUILIBRIUM EXPECTED RETURN EXPECTED VALUE EXTERNAL FINANCING FINANCIAL MARKET FINANCIAL MARKETS FINANCIAL SHOCK FINANCIAL STABILITY FINANCING REQUIREMENTS FISCAL EFFORTS FOREIGN LENDERS FOREIGN LOANS FORMAL ANALYSIS GDP GOVERNMENT BONDS INCOME INEFFICIENCY INSOLVENCY INSTITUTIONAL LOAN INSTITUTIONAL LOANS INTEREST RATE INTEREST RATES INTEREST REDUCTIONS INTERNATIONAL BANK INTERNATIONAL CRISIS LENDING IPOS JUNIOR DEBT LARGE CREDITORS LARGE NUMBER OF CREDITORS LENDER LENDERS LEVEL OF RISK LIQUIDITY LIQUIDITY CRISES LOAN CONTRACT LOAN RATE LOAN RATES LOAN REPAYMENT LONG-TERM DEBT LOW INTEREST RATE LOWER DEBT MARGINAL COST MARGINAL COST OF DEBT MARGINAL PRODUCTIVITY MARKET VALUE MORAL HAZARD NEGATIVE SHOCKS NEGOTIATION NEGOTIATIONS OLD BONDS OLD DEBT OPPORTUNITY COST OPTIMAL CONTRACTS PENALTY FOR DEFAULT PRIVATE CREDITORS PRIVATE DEBT PRIVATE INVESTORS PRIVATE LENDERS PRIVATE LENDING PRIVATE LOAN PRIVATE LOANS PRIVATE PARTIES PROBABILITY OF DEFAULT PUBLIC DEBT PUBLIC DEBT MANAGEMENT RATE OF RETURN REMEDY REPAYMENT REPAYMENT SCHEDULE REPUDIATION RETURN RISK-FREE INVESTMENT RISK-FREE RATE SENIOR BONDS SHORT-TERM DEBT SOVEREIGN DEBT SOVEREIGN LENDING STANDARD DEBT CONTRACT TAX TAXATION TOTAL DEBT
spellingShingle	ARBITRAGE ASSETS BAILOUT BAILOUTS BALANCE SHEET BANKRUPTCY BOND BOND HOLDERS BOND SPREADS BONDHOLDERS BORROWER BORROWING BORROWING COST CENTRAL BANK CLAIM CLASS OF DEBT COMPETITIVE MARKETS CONTINGENT DEBT COST OF DEBT COUPON CREDIT MARKET CREDITOR DEBT DEBT CONTRACT DEBT CONTRACTS DEBT CRISES DEBT FORGIVENESS DEBT MATURITY DEBT PAYMENT DEBT PAYMENTS DEBT REDUCTION DEBT REDUCTIONS DEBT SERVICE DEBT SERVICE BURDEN DEBT SERVICING DEFAULT PENALTY DEFAULT PROBABILITIES DEFAULTS DEFICITS DEVELOPMENT POLICY DIVIDEND ECONOMIC HISTORY ECONOMIC THEORY EQUILIBRIUM EXPECTED RETURN EXPECTED VALUE EXTERNAL FINANCING FINANCIAL MARKET FINANCIAL MARKETS FINANCIAL SHOCK FINANCIAL STABILITY FINANCING REQUIREMENTS FISCAL EFFORTS FOREIGN LENDERS FOREIGN LOANS FORMAL ANALYSIS GDP GOVERNMENT BONDS INCOME INEFFICIENCY INSOLVENCY INSTITUTIONAL LOAN INSTITUTIONAL LOANS INTEREST RATE INTEREST RATES INTEREST REDUCTIONS INTERNATIONAL BANK INTERNATIONAL CRISIS LENDING IPOS JUNIOR DEBT LARGE CREDITORS LARGE NUMBER OF CREDITORS LENDER LENDERS LEVEL OF RISK LIQUIDITY LIQUIDITY CRISES LOAN CONTRACT LOAN RATE LOAN RATES LOAN REPAYMENT LONG-TERM DEBT LOW INTEREST RATE LOWER DEBT MARGINAL COST MARGINAL COST OF DEBT MARGINAL PRODUCTIVITY MARKET VALUE MORAL HAZARD NEGATIVE SHOCKS NEGOTIATION NEGOTIATIONS OLD BONDS OLD DEBT OPPORTUNITY COST OPTIMAL CONTRACTS PENALTY FOR DEFAULT PRIVATE CREDITORS PRIVATE DEBT PRIVATE INVESTORS PRIVATE LENDERS PRIVATE LENDING PRIVATE LOAN PRIVATE LOANS PRIVATE PARTIES PROBABILITY OF DEFAULT PUBLIC DEBT PUBLIC DEBT MANAGEMENT RATE OF RETURN REMEDY REPAYMENT REPAYMENT SCHEDULE REPUDIATION RETURN RISK-FREE INVESTMENT RISK-FREE RATE SENIOR BONDS SHORT-TERM DEBT SOVEREIGN DEBT SOVEREIGN LENDING STANDARD DEBT CONTRACT TAX TAXATION TOTAL DEBT Chamley, Christophe Pinto, Brian Sovereign Bailouts and Senior Loans
relation	Policy Research Working Paper; No. 6181
description	Institutional lending in crisis is evaluated from a theoretical point of view. First, the share of senior loans in new loans is irrelevant under a given probability distribution of the country's resources. Second, seniority may partially alleviate the inefficiency of debt contracts when the distribution of resources is endogenous to the country's physical investment and effort towards success. Third, with multiple lending rate equilibria, institutional lending may induce a switch to a lower private loan rate if it can be done in a sufficiently large amount. Fourth, conditions are analyzed under which debt forgiveness is efficient under a financial shock.
format	Publications & Research :: Policy Research Working Paper
author	Chamley, Christophe Pinto, Brian
author_facet	Chamley, Christophe Pinto, Brian
author_sort	Chamley, Christophe
title	Sovereign Bailouts and Senior Loans
title_short	Sovereign Bailouts and Senior Loans
title_full	Sovereign Bailouts and Senior Loans
title_fullStr	Sovereign Bailouts and Senior Loans
title_full_unstemmed	Sovereign Bailouts and Senior Loans
title_sort	sovereign bailouts and senior loans
publisher	World Bank, Washington, DC
publishDate	2013
url	http://documents.worldbank.org/curated/en/2012/08/16631805/sovereign-bailouts-senior-loans http://hdl.handle.net/10986/12030
_version_	1764418759889518592

Sovereign Bailouts and Senior Loans

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