Sovereigns have been defaulting on their debts over decades now. A sovereign debt default
necessitates a restructuring of the debt instrument in order to reduce the size of the debt or lengthen the maturity period. One of the methods of debt restructuring is an ‘exchange offer’ where the old debt instrument, for example the bond, is exchanged for new debt instruments with altered terms and conditions, particularly the payment terms. Whereas some investors may agree to such restructuring and accept the exchange offer, others might have different aspirations for their investments. A successful sovereign debt restructuring takes place when the debtor has acquired the consent of a pre-determined number of creditors, or the restructuring threshold. The restructuring threshold is, however, a function of two critical variables – (i) investor confidence: low threshold percentage reflects low investor confidence in the issuer; (ii) success of the restructuring: high threshold percentage makes it difficult to achieve the required number of consenting investors. Thus, maintaining a balance between the two becomes crucial for the debtor country. In this article, previous sovereign debt restructuring episodes have been analyzed to study the different threshold
levels prescribed by different countries, and an attempt has been made to study whether there is a possibility of an optimum threshold level that can be prescribed as a supra-national code for all sovereign debt restructurings.