Jurisdictional issues such as the robustness of an insolvency regime and the strength of its bankruptcy laws should be taken into account when evaluating investments in emerging market bonds along with possible recovery rates in terms of absolute amounts and the time needed to restructure, according to a new Fitch Ratings report.
"Emerging markets continue to present incremental risks to fixed-income investors in the context of creditor rights in the event of default," said
In some countries a limited number of cases have been ultimately resolved by the highest federal court, and lower federal court decisions tend to be inconsistent and, in some cases, contradictory. Thus, uncertainties still remain as to whether the practical application of the law by the legal system would be in line with the legal theory.
Improvements have been made in
Complex rules governing the allocation of secured assets can slow down bankruptcy proceedings. Especially in cases in which effecting foreclosure requires court-supervised arbitration, the transfer of secured assets to creditors can take years.
For more information, see the special report titled "Weak Emerging Market Insolvency Regimes Drive Caution," which is available on the Fitch Ratings web site at www.fitchratings.com or by clicking on the link above.
Additional information is available at 'www.fitchratings.com'.
Source: Fitch Ratings
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