CFA Level I · CFA Level I Exam · Credit Analysis for Government Issuers
A sovereign is negotiating with its bondholders and offers new bonds with a lower coupon and longer maturity than the existing bonds, with no reduction in principal. This restructuring is best described as a:
This is a debt rescheduling, also called reprofiling. The sovereign changes the payment terms, here a lower coupon and longer maturity, but keeps the principal amount unchanged. A haircut would cut the face value, and a debt-for-equity swap would give creditors ownership claims.
- Adebt reprofiling or reschedulingCorrect
- Bprincipal haircut
- Cdebt-for-equity swap
Explanation
Changing terms such as coupon and maturity while leaving face value intact is a rescheduling or reprofiling. A haircut reduces principal, and a debt-for-equity swap exchanges debt for ownership claims, neither of which is described.
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