# 3.3. Restructurings and private creditor losses across 200 years

Figure 2 shows the main result on creditor losses, by plotting the size of haircuts (vertical axis) in restructurings of external sovereign debt between 1815 and 2016 (horizontal axis). As explained, the data since 1975 come from Cruces and Trebesch (2013) and predominantly include haircuts on sovereign bank loans (plus about 20 recent sovereign bond defaults). This study adds the preceding 160 years, and thus, haircut estimates for more than 150 bond defaults for which no data existed. Each observation represents one restructuring spell, where the size of haircuts is averaged across all instruments involved (volumeweighted). The size of the circles represents the inflation-adjusted amounts of debt affected by the restructurings (in real 2009 USD). Some of the haircuts shown are negative, but these are only 10 events, and they mostly occur at the start of debt distress.<sup>26</sup> To complement this picture, Table 1 provides summary statistics and adds information for different haircut measures.

Figure 2: Haircuts in sovereign debt restructurings with foreign private creditors since 1815 <!-- Start of picture text --> Haircut,<br>in % 100 ESP PRT MEX DOM GRC RUS HND CHN L ESTTUVA CUB<br>ROU SRB YEM LBR<br>TURPER NIC<br>COL NIC TUR COLLBR MEX BGRBOL GRCCZKPOL BOLMOZGUYUGAZMBSTPSLENICMRTETHSENTGOBIHGINGUYCMRTZAIRQMOZCOG<br>VEN MEX COL VENCRIMEX ECU CRI TUR MEXSLV AUT NERALB HND<br>ARGSLVCOL HND PRY CZKCHLPERECU HUN HNDCRIBOL SRBARGECU<br>PER SLV PERCIV KNAGRC<br>GRC COL POL<br>500 MEXESP PRTCRIMEXCHLPRTPERBRAECUGTMPRTVEN VEN MEXESP EGYEGYURYEGYBOLESPCHLPRYGTMARGURYDOMARG VEN GTMECUSRBNICDOMECUGTMBRAMEXSLVPRTTURVENCOLDOMECUCRINICGTM BRA NIC LBRSLVPRYMEXBGRTURSLVCRIDOMGRCCHLLBRCRIHUNCHNNICCRICUBDEUPOLPERURYPANBRAGTMPRY FIN THAITA AUTCRIJPNDEU JAM JAMTURCODNICMDGJAMNICROUTURLBRPOLNICMEX NGA MWICODROUCUBURYCHLECUPERCRIMDGNGACOD BRA CUBJAECUNERSRBPOLSENNICMEXARGCODCUBJAMSDNECUPANSRBSENCRIDOMMARCODROUBRAVENURYCHLNERPHLMDG M MARNGAARGCODGABJAMCHLPHLZAFGMBMEXMWINGACOGBRAVENURYTGOPOLSRBGINNGAEXCODTTOPOLZAFMDGMARMEXVENJAMCHLPHLSENNGAURYDZAPHLARGPRYZAFJORDOMGABBGRBRAPOLSVNECUDZAHRVPANMKDVNMRUSUKRKENPAKUKRECURUSRUSMDAURYDMAMDADOMGRDBLZSYCCIVCIV BLZ GRDUKR<br>PER<br>PER BRA UKR<br>ZWE<br>1815 1835 1855 1875 1895 1915 1935 1955 1975 1995 2015<br><!-- End of picture text --> _Note:_ This figure shows the size of haircuts (as a % of debt affected) in sovereign debt restructuring spells with external banks and bondholders over the past 200 years. The calculations are based on equation (1) as well as the methodology and data sources described in the text and Appendix C. The circle size captures the amount of debt involved, adjusted for inflation (based on constant 2009 USD).

> 26 In these early stages of a crisis, sovereigns may do what it takes to avoid a default, for example, by extending debt maturities at higher interest rates than before. These deals do not imply debt relief, but may nevertheless be beneficial for the government, at least in the short term, as these may smooth out repayment and may reduce potential rollover risks. Often proving insufficient to deal with the debt sustainability problem, these initial deals are followed by later restructurings with larger haircuts.

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