New York, August 07, 2012 — Historical evidence shows that the risk of re-default tends to remain high after sovereign distressed exchanges, Moody’s Investors Service says in a new report that analyzes the modern history of sovereign bond defaults and the haircuts imposed on investors.
The new report, entitled “Sovereign Defaults Series: Investor Losses in Modern-Era Sovereign Bond Restructurings,” is available on www.moodys.com. Moody’s subscribers can access this report via the link provided at the end of this press release.
“Thirty-seven percent of the 30 sovereign debt exchanges since 1997 were followed by further default events,” explains Elena Duggar, Moody’s Group Credit Officer for Sovereign Risk and author of the report. “These high rates of re-default after a distressed exchange in the sovereign sector are similar to the experience in the global corporate sector and explain why ratings often remain low, in the Caa-C rating range, following distressed exchanges.”
Since 1997, there have been 30 distressed exchanges on sovereign bonds, by 22 sovereign issuers. Moody’s new report pinpoints four key findings:
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