Financial Advisory

Over the past 50 years, the Latin American and Caribbean region has faced numerous sovereign debt crises, with at least 50 instances of sovereign debt restructurings. The COVID-19 pandemic exacerbated existing economic challenges, leading several countries, including Argentina and Ecuador, to seek comprehensive debt restructurings. Argentina restructured approximately $65 billion of external debt owed to private creditors, while Ecuador restructured $17.4 billion of external private debt. Additionally, over ten Argentine provinces collectively restructured more than $10 billion of external private debt, including the Province of Buenos Aires, which restructured $7.1 billion. The restructuring process during this period highlighted the importance of well-organized creditor committees, which facilitated negotiations and helped achieve substantial debt relief while preserving bondholder value. For instance, Ecuador successfully negotiated a comprehensive restructuring agreement in September 2020, achieving a 98% creditor participation rate. This was made possible through good-faith negotiations and the strategic use of contractual mechanisms to mitigate holdout risks. In contrast, Argentina initially adopted a confrontational approach, but after months of negotiations, it reached a deal that provided $39 billion in debt relief over nine years through maturity extensions and coupon reductions. The restructuring experiences of these countries during the COVID-19 era have established a new paradigm for sovereign debt restructurings, emphasizing the need for effective creditor coordination and the use of collective action clauses (CACs) to bind dissenting creditors. The successful outcomes in Ecuador and Argentina demonstrate that tailored restructuring solutions, grounded in collaborative negotiations and innovative contractual frameworks, can lead to orderly and consensual debt relief, setting a precedent for future sovereign restructurings in the region and beyond.