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Sovereign Debt Restructuring: The Judge, the Vultures and Creditor Rights

We analyse the role of judiical interventiin in helping to achieve the Argentine debt swao of 2005 with a super-majority of 76% of creditors (by value). The courts appear to have exploited creditor heterogeneity - between holdouts seeking capital gains and institutional investors wanting a settlement - to achieve a swap and to protect creditor rights. Our analysis shows how the courts have de facto carried out two of the key roles envisaged for the IMF's still-born Sovereign Debt Restructuring Mechanism (SDRM) - namely Transition and Aggregation; and it suggests how the courts can, in future, complement the market-based alternative promoted by the US Treasury - i.e. collective action clauses (CAC's) in sovereign bond contracts.