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Question
Which of the following is NOT a reason why international loans are more likely to be rescheduled than international bonds?
A. Governments appear to view the social costs of default on bonds as less critical than on loans.
B. Many international loan contracts contain cross-default provisions that automatically put into default all loans by that country in the case of one default.
C. Banks receive no subsidization from major governments to make international loans.
D. Many international loan syndicates contain the same group of banks which increases the cohesiveness of loan renegotiations.
E. Renegotiation of loans is easier because there are fewer banks in loan syndication than there are bondholders in a debt offering.
Answer
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