Recent Examples
Successful litigations were undertaken by some holdout problems in Peru (1996) and Argentina (2001). In a well-known holdout case involving the sovereign bonds of Peru, the New-York-based vulture fund Elliot Associates L.P. obtained injunctions in Canada, Belgium, Luxembourg, Holland, Germany and the UK to prevent the Peruvian government from repaying other creditors until the hedge fund had received payment in full.
The possibility that holdout creditors can attach future payments on restructured debt and receive better treatment than cooperating creditors distorts incentives and can derail efforts for a cooperative restructuring. It is likely to be of particular importance in cases in which the creditors are being asked to accept substantial debt and debt service reduction. However, it is unclear given the special circumstances of the Elliot case whether it will be broadly applicable to holdouts in other restructurings.
Read more about this topic: Holdout Problem
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