This paper examines state-contingent debt instruments (SCDIs) in sovereign debt restructurings, with a particular focus on value recovery instruments (VRIs). This technique provides additional recoveries to creditors if the debtor’s capacity to pay exceeds that assumed by the parties at the time of the restructuring and, in appropriate cases, could also be used to reduce or delay recoveries if the debtor’s financial situation worsens. This report examines the potential advantages and disadvantages of SCDIs, while highlighting the real-world challenges that need to be addressed if SCDIs are to become more effective and widely used tools of sovereign debt management. […]