Haircuts: Estimating investor losses in sovereign debt restructurings, 1998–2005

We calculate investor losses (“haircuts”) and recovery values in recent debt restructurings in Russia, Ukraine, Pakistan, Ecuador, Argentina, and Uruguay. Haircuts are computed as the percentage difference between the present values of old and new instruments, discounted at the yield prevailing immediately after the exchange. Recovery value means value received in terms of outstanding principal. We find average NPV haircuts ranging from 13% (Uruguay external exchange) to 73% (2005 Argentina exchange); recovery values range from 30% to about 75%. We also find within-exchange variations in haircuts and recovery values, depending on the bond tendered. With a few exceptions, domestic residents do not appear to have been treated systematically better (or worse) than foreign residents.