By Steven T. Kargman (Kargman Associates/International Restructuring Advisors)
A new article entitled “The COVID-19 Pandemic and Emerging Market Restructurings: The View One Year Later” provides an overview of the challenging economic landscape that continues to face many emerging economies in the wake of the COVID-19 pandemic, and it also discusses current sovereign debt restructuring and corporate debt restructuring issues in the emerging economies.
The article provides an analysis of sovereign debt restructuring situations involving a serial defaulter (Argentina) and failing states (Venezuela and Lebanon). It also reviews the sovereign debt restructuring travails of an African state, Zambia, that may have implications for future sovereign debt restructurings in Sub-Saharan Africa in light of the intercreditor tensions that arose in the Zambian case between Chinese creditors and bondholders.
Even though corporate defaults in the emerging economies were fairly muted over the last year, many observers expect a surge of corporate defaults, restructurings, and non-performing loans (NPLs) in the emerging economies and developing countries in the coming years, particularly as the special COVID-related responses of governments come to an end. Nonetheless, if and when there is a sharp increase in insolvencies in emerging market jurisdictions, this could pose a major problem for the court systems in the emerging economies and developing economies given the limited capacity of many of these systems to deal with a large volume of cases. Thus, there may well be a need for greater reliance on out-of-court restructurings to address this expected surge in insolvency cases in the emerging economies and developing countries.
The article originally appeared in International Insolvency & Restructuring Report 2021/22 and is reprinted with the permission of its publisher, Capital Markets Intelligence. The article can be found here.