That 'haircut' is based on interest assumptions not actual costs. The actual haircut was only 53.5% of the face value so if you bought it from someone else at a higher discount you made significant profit. Assuming you sold it or there will be no second default.
I'm all for knocking on predatory bankers, but that's not a very compelling argument.
The borrower sold a bond at par -- so they got their $1. As the entity who bought that bond, you're fucked... the borrower isn't making interest payments and the debt is looking like a bad debt. So you sell it at a distressed value, in your example $0.53, losing half your principal investment + interest, to cut your losses.
The entity buying the distressed asset knows it's junk, which is why they buy it at a steep discount. The fact that they may make a significant profit if the borrower starts making payments is irrelevant.
At this point people start whining about predatory Goldman Sachs, etc. Notice that there was no outcry when places like Greece and Venezuela were happily borrowing and squandering money based on German credit (Greece) or temporarily inflated oil revenues (Venezuela). In the case of Venezuela, they managed to also kill the golden goose by deferring critical investments in oil infrastructure and making dumb political decisions.
Goldman Sachs has not and is not lending Venezuela any money. So, if they buy a bond from someone else at less than face value they have zero room to complain about an agreement that was not made with them. At best they are trying to make a quick buck off the person that sold them the bond and again have no room to talk with the issuer.
That's not really accurate. Goldman bought the bond from the original owner and is now a creditor.
They can and will talk to the issuer about payment and have every right to demand full payment -- the obligation to pay is not diminished by the secondary market value.
In my personal case, I had an opportunity to buy tax exempt New York General Obligation bonds at a discount during the 2008 financial crisis. I did so, although New York isn't Venezuela and the discount wasn't 50%, the interest payments are based on the originally issued amount and if I hold the bond to maturity I will get the full principal.
As an individual with 1 bond I don't have the leverage of an investment bank, but I'm still a creditor and will be get paid in the event of some serious financial crisis.
The idea that debt is transferable like this is a specific rule under a specific system. You can also loan debt so the recipient has right of first refusal on all transfers and then they could have simply bought that debt at that same discount.
I am not saying the second system is universally better, but there is a reasonable argument for and against it.
Suppose, I buy a bond at 5% interest over 1 year and it defaults after making most of the payments. If I effectively only get 1% interest the IRS says I still owe taxes on that 1% as profit.
Just because Goldman Sachs would make an amazing profit if Venezuela actually made good on their debt doesn't mean they don't own Venezuela debt, right? "Goldman Sachs has not and is not lending Venezuela any money" is patently false.
GS is buying debt that someone else had. That other group loaned Venezuela money and is now selling the debt at a discount.
Critically if GS did not buy the debt Venezuela would have exactly the same money and exactly the same obligations so the fact GS 'owns' the debt or bob the accountant owns the debt is only important in so far as GS can apply more pressure.
Sorry, are you saying that if a bond is supposed to pay a certain interest which isn't actually paid, that this isn't a partial default because the interest is only an "assumption"? And we should only count the face value of the bond?
I think the point is more that by the time the default happened, the market already considered the bonds to be worth less then what they ended up being worth.
The fact that the market priced in the haircut does not mean there was no haircut. It just distributes the loss between different creditors. The bonds are just as much in default, representing a net transfer from creditors to borrowers.
Except, it has not defaulted to the ECB, Eurozone or IMF... these institutions are insane, when asked "We owe you x billion dollars at the end of the month. We can either pay you or pay our pensioners. What should we do?", the answer was, "Well, pay us!".
Greece had the largest default in history[0], virtually all private debt holders were forced to take a ~70% haircut.
[0]: https://en.wikipedia.org/wiki/Private_sector_involvement