Cooking Up a New Solution
As Argentina gears up for negotiations with the bondholders it stiffed 18 months ago, other sovereign issuers and banks are experimenting with a new generation of bonds that could profoundly reshape the debt market for years to come.
Argentina has been among the world's worst credits almost
from the day it was founded. Writing 150 years ago, Juan
Bautista Alberdi, one of the country's founding fathers, said,
"Argentine governments would have to be very blind if they did
not recognize that failing to fulfill their responsibility to
pay interest on their debt is the same as poisoning their
bread, their sole source of sustenance; it is more disastrous
to condemn oneself to bankruptcy and hunger than to suffer
Argentine leaders have never heeded Alberdi's remarks. In
December 2001, the country staged the biggest sovereign default
in recent history, and in the process, reduced millions of its
people to abject poverty. This $144 billion default came less
than 10 years after the government signed a $53 billion Brady
bond deal that restructured defaulted debt from the 1980s.
Officials in the new government of President Néstor
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