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In the second round, creditors converted their existing claims into their choice among the "menu" of options agreed upon in the first round. The penalties for creditors failing to comply with the terms of the deal were never made explicit. Nevertheless, compliance was not an important problem under
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Stakeholders involved in Brady Bond debt restructuring and transactions. Dollar values on outstanding loans and bonds are illustrative; bonds were rarely issued for less than US$ 125 million, and lenders frequently accepted either 30–50% losses on face value or reduced interest rates fixed at
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By offering a "menu" of options, the Brady Plan permitted credit restructurings to be tailored to the heterogeneous preferences of creditors. The terms achieved under the deals indicate that debtors used the menu approach to reduce the cost of debt reduction. Furthermore, it reduced the
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below-market values. According to EMTA, a financial industry trade association, most lenders that accepted Brady bonds for outstanding loans were smaller US commercial banks or non-US financial institutions, rather than "major money center banks."
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were issued to the same value as the original loan, but the coupon on the bonds is below market rate; principal and interest payments are usually guaranteed.
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were issued at a discount to the original value of the loan, but the coupon is at market rate; principal and interest payments are usually guaranteed.
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rights. Not all Brady bonds would necessarily have all those forms of guarantee, and the specifics would vary from issuance to issuance.
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the Brady Plan. Banks wishing to cease their foreign lending activities tended to choose the exit option under the auspices of the deal.
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embedded in the bonds, "stepped" coupons, pars and discounts) were retained in the later sovereign restructurings in, for example,
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in which certain holders have an incentive not to participate in the restructuring in the hope of getting a better deal.
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Although the Brady bond process ended during the 1990s, many of the innovations introduced in these restructurings (
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to exchange their claims on developing countries into tradable instruments, allowing them to get the debt off their
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415:. The latter country, in 1999, became the first country to default on its Brady bonds. In 2003,
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Participating countries were to liberalize their economies in order to qualify for Brady Bonds.
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Countries that participated in the initial round of issuing Brady bonds were
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The key innovation behind the introduction of Brady Bonds was to allow the
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on their debt in the 1980s. At the time, the market for emerging markets'
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Collective Action
Difficulties in Foreign Lending: Banks and Bonds (FRBSF)
534:"Debt, finance and the IMF: three decades of debt crises in Latin America"
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debt facilitated risk-spreading and trading. In exchange for commercial
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Brady bonds were created in March 1989 to convert bank loans, mostly in
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The principal amount was usually collateralized by specially issued
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376:(PDI). Brady Bond negotiations generally involved some form of "
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to guarantee the principal, rolling interest guarantees, and
506:. Trade Association for the Emerging Markets. Archived from
500:"History and Development: Emerging Markets and Brady Plan"
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Treasury press release on Mexico retiring its Brady bonds
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countries in the late 1980s. The bonds were named after
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bought back all of its Brady bonds in May 2007, joining
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became the first country to retire its Brady debt. The
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purchased by the debtor country using a combination of
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History of the foreign relations of the United States
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South
America, Central America and the Caribbean 2004
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IMF press release on Mexico retiring its Brady bonds
161:, who proposed a novel debt-reduction agreement for
57:. Unsourced material may be challenged and removed.
335:, but did not prevent future looming debt crises.
331:The Brady Bonds were credited for resolving the
212:. Because they were tradable and came with some
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387:Guarantees attached to Brady bonds included
439:as countries that have retired the bonds.
343:There were two main types of Brady bonds:
384:of the claims before the restructurings.
204:, the countries issued new bonds for the
117:Learn how and when to remove this message
540:, London, UK: Routledge, pp. 8–12,
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481:. Emerging Markets Traders Association
640:Economic history of the United States
362:front-loaded interest-reduction bonds
248:US Treasury 30-year zero-coupon bonds
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55:adding citations to reliable sources
566:Chung, Joanna (26 February 2006).
360:Other, less common, types include
177:, into a variety or "menu" of new
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268:Federal Reserve Bank of New York
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630:1989 in international relations
610:BBC story on Ecuadorean default
578:from the original on 2021-11-05
42:needs additional citations for
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193:, and the standardization of
568:"Brady bonds shrinking fast"
532:Shadlen, Kenneth C. (2005),
635:Bonds in foreign currencies
252:International Monetary Fund
208:and, in some cases, unpaid
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333:Latin American debt crisis
260:foreign currency reserves
258:, and the country's own
374:past-due interest bonds
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370:debt-conversion bonds
181:after many countries
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163:developing countries
51:improve this article
227:. This reduced the
149:, issued mostly by
291:Dominican Republic
229:concentration risk
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547:978-1-85743-188-9
510:on 11 August 2011
459:Sovereign default
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66:"Brady Bonds"
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62:Find sources:
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580:. Retrieved
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551:, retrieved
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504:www.emta.org
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49:Please help
44:verification
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454:Debt relief
421:Philippines
372:(DCB), and
311:Philippines
139:Brady bonds
18:Brady bonds
624:Categories
582:2021-03-29
572:www.ft.com
553:2021-03-29
485:2023-02-24
465:References
389:collateral
382:face value
287:Costa Rica
256:World Bank
214:guarantees
157:Secretary
77:newspapers
514:16 August
433:Venezuela
364:(FLIRB),
348:Par bonds
323:Venezuela
275:Argentina
183:defaulted
107:July 2011
576:Archived
443:See also
425:Colombia
283:Bulgaria
210:interest
191:illiquid
413:Ecuador
378:haircut
319:Uruguay
307:Nigeria
303:Morocco
295:Ecuador
169:History
91:scholar
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437:Mexico
435:, and
429:Brazil
417:Mexico
409:Russia
321:, and
315:Poland
299:Mexico
279:Brazil
143:dollar
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339:Types
202:loans
179:bonds
147:bonds
98:JSTOR
84:books
542:ISBN
516:2018
449:Debt
411:and
199:bank
141:are
70:news
53:by
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