The bonds were named after U.S. Treasury Secretary Nicholas Brady, who proposed a novel debt-reduction agreement for developing countries.
In exchange for commercial bank loans, the countries issued new bonds for the principal sum and, in some cases, unpaid interest.
Banks wishing to cease their foreign lending activities tended to choose the exit option under the auspices of the deal.
By offering a "menu" of options, the Brady Plan permitted credit restructurings to be tailored to the heterogeneous preferences of creditors.
Interest payments on Brady bonds, in some cases, are guaranteed by securities of at least double-A-rated credit quality held with the Federal Reserve Bank of New York.
Countries that participated in the initial round of issuing Brady bonds were Argentina, Brazil, Bulgaria, Costa Rica, Dominican Republic, Ecuador, Mexico, Morocco, Nigeria, Philippines, Poland, Uruguay, and Venezuela.