Debt discount

Thanks to Dan for pointing out via the Liberia Expats Google Group this useful overview of recent developments in Liberia debt reduction by Steve Radelet at the Center for Global Development. Radelet explains why some creditors recently agreed to accept a deal where Liberia returned 3 cents on every dollar owed:

So why would the creditors make a deal with such a steep discount? It was not always clear that they would. But for some of the original creditors that still held the debt, it was in fact a bit of a bonus. Many had fully written it off their balance sheets years ago, so any payment now was a big plus. For those hedge funds that bought the debt for even less during the height of the war, the result was actually a nice profit.

There are some crazy statistics in this article, but the one that sticks out most is that even with the frequent news about Liberia making more and more progress on debt reduction, it has only gotten rid of $1.7 billion of $3 billion in debt.