Debt and Related Operations 301
Debt Concessionality
A3.39 Th ere is no consistent defi nition or measure
of debt concessionality in macroeconomic statistics.
However, it is generally accepted that concessional loans
occur when units lend to other units and the contrac-
tual interest rate is intentionally set below the market
interest rate that would otherwise apply. Th e degree of
concessionality can be enhanced with grace periods,^12
and frequencies of payments and maturity periods fa-
vorable to the debtor.
A3.40 Since the terms of a concessional loan are
more favorable to the debtor than market condi-
tions would otherwise permit, concessional loans
eff ectively include a transfer from the creditor to
the debtor. However, the means of incorporating
the transfer impact within macroeconomic statis-
tics have not been fully developed, although vari-
ous alternatives have been advanced. Accordingly,
until the appropriate treatment of concessional debt
is agreed, information on concessional debt should
be provided in a memorandum item to the balance
sheet (see paragraph 7.246) and/or in supplemen-
tary tables.
A3.41 Th e case of Paris Club debt concessionality
is discussed in Chapter 4 of the PSDS Guide.
Debt Arising from Bailout Operations
A3.42 A bailout refers to a rescue from fi nancial
distress. It is oft en used when a government unit pro-
vides either short-term fi nancial assistance to a corpo-
ration to help it survive a period of fi nancial diffi culty,
or a more permanent injection of fi nancial resources
to help recapitalize the corporation. A bailout may,
in eff ect, constitute nationalization if the government
acquires control of the corporation it is bailing out.
Bailouts of fi nancial institutions are a case in point.
Th ey are likely to involve highly publicized, one-time
transactions oft en involving large amounts and are,
therefore, easy to identify.
A3.43 Analysts generally refer to “capital injec-
tions” made by government into corporations when
some signifi cant fi nancial support is provided to capi-
talize or recapitalize the corporation in fi nancial dis-
tress. Th e 2008 SNA uses “capital injections” to mean
(^12) Th e grace period is the period from the disbursement of the
loan until the fi rst payment due by the debtor.
a direct intervention that is recorded in macroeco-
nomic statistics either as a capital transfer, a loan, an
acquisition of equity, or a combination of these. Di-
rect intervention by general government units may
take various forms—for example:
- Providing recapitalization through an injection
of fi nancial resources (“capital injection”) or the
assumption of a failed corporation’s liabilities. - Providing loans and/or acquiring equity in the
corporations in distress (i.e., “requited recapital-
ization”) on favorable terms, or not. - Purchasing assets from the fi nancially distressed
corporation at prices greater than their true mar-
ket value.
A3.44 Indirectly, general government may inter-
vene by extending the range of guarantees it is pre-
pared to off er.
A3.45 Broadly, two main issues arise with bailout
operations:- Th e fi rst issue is the sectorization of the entity
or unit created to fi nance or manage the sales
of assets and/or liabilities of the distressed cor-
poration. Th e sectorization is important, in par-
ticular, for determining whether its transactions,
other economic fl ows, and stock positions (debt
liabilities and other assets and liabilities) are
within the general government sector or public
corporations sector. - Th e second issue is the appropriate statistical
treatment of “capital injections.”
Th e sectorization issue
A3.46 A government might create a restructur-
ing agency (or “defeasance structure”) in the form
of a special purpose entity (SPE), or other type of
public body, to fi nance or to manage the defeasance
of impaired assets or repayment of liabilities of the
distressed corporation.^13 As is the case with all enti-
ties in macroeconomic statistics, the sectorization of
a restructuring agency should refl ect the underlying
economic nature of the entity. Th us, the sectorization
rules, as outlined in Chapter 2, should be applied to(^13) In the case of banks with impaired assets, such entities are com-
monly referred to as “bad banks.”