I would argue that there is such a thing as “kind of” default. Consider a couple of scenarios and think about whether it’s a default in a “common sense” sense,

I would argue that there is such a thing as “kind of” default. Consider a couple of scenarios and think about whether it’s a default in a “common sense” sense, whether a ratings agency would/should consider it a default or selective default, and whether it would/should be treated as a default under CDS contracts: 1) Debtor simply stops paying interest or principal. 2) Debtor makes a voluntary exchange offer, offering new debt that is generally considered to offer _better_ terms (e.g. higher interest rate but longer maturity). 90% of creditors accept. 3) Debtor makes a voluntary exchange offer, offering new debt that is generally considered to offer _worse_ terms (e.g. same interest rate but longer maturity). 80% of creditors accept, perhaps because they think it’s better than an actual default later. 4) The debt contract has a collective action cause saying that if 2/3 of creditors accept, an exchange offer is binding on everyone. 2/3 of creditors accept an exchange offer that offers worse terms. 5) Debtor makes a voluntary exchange offer. The central bank announces that a month after the exchange offer replies are due, it will stop accepting the old debt as collateral for loans by the central bank and will only accept the new debt as collateral. Would you say that all of these are default and there are no gray areas?