FRIDAY 31st MAY

The current restructuring framework is slow and conflictual due to its reliance on a sequential process. This panel aims to explore an integrated framework where all creditors, both private and official, can make their decisions simultaneously based on the same information.

Currently, the restructuring process follows a sequential approach where the sovereign first reaches an agreement with its official bilateral creditors and then negotiates with private creditors. This approach no longer makes sense as it leads to uncertainty, recriminations, and delays, especially when official bilateral creditors are hesitant to act without clarity on what will be offered to private creditors.

The panel will delve into the possibility of reforming the process by adopting an integrated framework. Under this proposed system, all creditors, whether private or official, will make their decisions simultaneously based on the same information. While some differential treatment may be necessary in certain circumstances, fairness will be ensured as each creditor will make its decision with full knowledge of what other creditors are being offered. This simultaneous decision-making process is crucial for the effective operation of corporate restructuring systems.

The panel will analyse the shortcomings of the current framework based on recent and ongoing cases and discuss the proposed alternative, which is detailed in a blog by Sean Hagan and will be further explored in an upcoming paper co-authored with Brad Setser.