Financial Times
May 18, 2011
Default: This is where a creditor or investor, who has agreed to lend to a company or government by buying bonds, does not receive their money, according to the terms of the contract, such as the failure to meet interest payments.
Restructuring: This is viewed in the markets as the polite term for a default and means the same thing.
Hard restructuring: This is a forced default, which typically involves creditors or investors suffering losses.
Soft restructuring: This is where investors agree to change the terms of the bonds, usually through an extension of bond maturities. Although this a voluntary agreement, investors still regard this as a default.
Reprofiling: A new word that appears to have been coined by EU policy-makers, which means the same thing as a soft restructuring.
Liability management: A term used by companies, which typically means the extension of debt maturities and could be considered the same thing as soft restructuring or reprofiling.
Haircuts: Losses suffered by bond investors.
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