Preferred and Non-Preferred Creditors

International financial institutions (IFIs) generally enjoy preferred creditors treatment (PCT). Although PCT rarely appears in legal contracts, when sovereigns restructure bilateral or commercial debts they normally pay IFIs in full. This paper pr...

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Main Authors:	Cordella, Tito, Powell, Andrew
Format:	Working Paper
Language:	English
Published:	World Bank, Washington, DC 2019
Subjects:	PREFERRED CREDITOR TREATMENT PREFERRED CREDITOR STATUS SOVEREIGN DEBT DEFAULTS INTERNATIONAL FINANCIAL INSTITUTIONS EMERGENCY FINANCING DEBT RESTRUCTURING FINANCIAL MARKETS
Online Access:	http://documents.worldbank.org/curated/en/578451563797490303/Preferred-and-Non-Preferred-Creditors http://hdl.handle.net/10986/32125

id	okr-10986-32125
recordtype	oai_dc
spelling	okr-10986-321252022-08-16T00:24:00Z Preferred and Non-Preferred Creditors Cordella, Tito Powell, Andrew PREFERRED CREDITOR TREATMENT PREFERRED CREDITOR STATUS SOVEREIGN DEBT DEFAULTS INTERNATIONAL FINANCIAL INSTITUTIONS EMERGENCY FINANCING DEBT RESTRUCTURING FINANCIAL MARKETS International financial institutions (IFIs) generally enjoy preferred creditors treatment (PCT). Although PCT rarely appears in legal contracts, when sovereigns restructure bilateral or commercial debts they normally pay IFIs in full. This paper presents a model where a creditor, such as an IFI, that can commit to lend limited amounts at the risk-free rate and can refrain from lending into arrears is always repaid and adds value. The analysis suggests that IFIs should not mimic commercial lenders, but exploit their complementarity, even if banning commercial borrowing can sometimes be optimal. IFIs should also focus on countries with limited market access and should not be forced into debt restructurings. 2019-07-29T17:29:46Z 2019-07-29T17:29:46Z 2019-07 Working Paper http://documents.worldbank.org/curated/en/578451563797490303/Preferred-and-Non-Preferred-Creditors http://hdl.handle.net/10986/32125 English Policy Research Working Paper;No. 8941 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo World Bank World Bank, Washington, DC Publications & Research Publications & Research :: Policy Research Working Paper
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	English
topic	PREFERRED CREDITOR TREATMENT PREFERRED CREDITOR STATUS SOVEREIGN DEBT DEFAULTS INTERNATIONAL FINANCIAL INSTITUTIONS EMERGENCY FINANCING DEBT RESTRUCTURING FINANCIAL MARKETS
spellingShingle	PREFERRED CREDITOR TREATMENT PREFERRED CREDITOR STATUS SOVEREIGN DEBT DEFAULTS INTERNATIONAL FINANCIAL INSTITUTIONS EMERGENCY FINANCING DEBT RESTRUCTURING FINANCIAL MARKETS Cordella, Tito Powell, Andrew Preferred and Non-Preferred Creditors
relation	Policy Research Working Paper;No. 8941
description	International financial institutions (IFIs) generally enjoy preferred creditors treatment (PCT). Although PCT rarely appears in legal contracts, when sovereigns restructure bilateral or commercial debts they normally pay IFIs in full. This paper presents a model where a creditor, such as an IFI, that can commit to lend limited amounts at the risk-free rate and can refrain from lending into arrears is always repaid and adds value. The analysis suggests that IFIs should not mimic commercial lenders, but exploit their complementarity, even if banning commercial borrowing can sometimes be optimal. IFIs should also focus on countries with limited market access and should not be forced into debt restructurings.
format	Working Paper
author	Cordella, Tito Powell, Andrew
author_facet	Cordella, Tito Powell, Andrew
author_sort	Cordella, Tito
title	Preferred and Non-Preferred Creditors
title_short	Preferred and Non-Preferred Creditors
title_full	Preferred and Non-Preferred Creditors
title_fullStr	Preferred and Non-Preferred Creditors
title_full_unstemmed	Preferred and Non-Preferred Creditors
title_sort	preferred and non-preferred creditors
publisher	World Bank, Washington, DC
publishDate	2019
url	http://documents.worldbank.org/curated/en/578451563797490303/Preferred-and-Non-Preferred-Creditors http://hdl.handle.net/10986/32125
_version_	1764475839846547456

Preferred and Non-Preferred Creditors

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