Yes, it's common for haircuts to be agreed at some point. The catch is that countries used to force these on domestic investors at least, by passing local legislation that typically says that if X% of investors agree to Y% of haircut, then all investors get the Y% haircut. So, the international investors got wiser and at least for some countries that have a history or higher risk of defaulting they shy away from bonds unless said country agrees that the laws of some other country apply to the default disputes, which precludes domestic legislation from forcing the hands of those investors. This is what happened to Argentina and later to Greece. In the latter case mostly because of supranational rules, IIRC.
To quote the general idea from a paper:
While a smooth resolution of a crisis situation may also be in the interest of creditors, each individual investor has an incentive to free-ride, by rejecting the haircut suffered by other creditors and insist on full repayment instead. Holdout creditors could even go to court
to enforce their claims in full, resulting in less debt relief and the risk of disruptive litigation. This well-known "holdout problem" has become evident in recent sovereign restructurings, most notably in Argentina 2005.
Thus far, the main policy response to solve this type of creditor coordination problem has been the introduction of Collective Action Clauses (CACs) in sovereign bond contracts. CACs can bind minority holdouts to accept the terms of a debt restructuring if a sufficiently large supermajority accepts the offer.
[...] smaller bonds, as well as bonds issued under foreign law (such
as English law), bonds with high coupons, and more actively traded bonds see higher average holdouts
And in more detail from the same, of the most famous examples
Uruguay 2003, Argentina 2005 and
Greece 2012 saw the largest within-deal variation, with holdouts ranging from 0 to 100%.
Uruguay 2003 involved 18 international bonds, 28 domestic bonds, and one Japanese-law bond
which were offered three separate restructuring deals. Four of the five Brady bonds and both of the two EUR-denominated bonds mostly held by retail investors had holdouts exceeding 25%. The Brady New Money Notes had a holdout rate of 75%. All other bonds had less than 10% holdouts.
Argentina 2005 is probably the most well-known sovereign bond restructuring that suffered from large-scale holdouts. Of the 145 bonds for which we could obtain bond-level participation information, 17 were completely tendered, 63 had more than
25% holdouts and 9 bonds had more than 50% holdouts. Most of these high-holdout bonds were heavily litigated.
Greece 2012 involved a total of 117 eligible securities, of which 75 were local-law, 35 English-law, five Japanese-law, one Swiss-law and one Italian-law. The 53 government-issued local-law bonds were retrofitted with the single-limb CACs that increased the participation from initially 82.5% to full. The participation rate across 22 government-guaranteed local-law instruments was very high (95%) even without the retrofitted CACs. In contrast, foreign-law bonds became a magnet for holdouts. Half of all (21 of the 42) foreign-law bonds saw holdouts above 50% and 9 bonds had 100% holdouts, meaning that not a single holder of the bonds agreed to participate. In aggregate, the final (post-CACs) participation rate for Greece's foreign-law bonds was 71%.
[...] Within the same deal, the range between the maximum and minimum haircuts across bonds
averages 17 percentage points, but in some cases the haircut distribution has been much more
dispersed and was highest in Argentina 2005 with a difference of 56 percentage points between
the bond with the lowest and highest haircuts. These numbers show that inter-creditor equity is
often violated ex post.
A similar take, expressed somewhat more dramatically:
For centuries, sovereign debt was assumed to be ‘above the law’ and non-enforceable. This column shows that this is no longer the case. Building on a new dataset on sovereign debt lawsuits, it documents the erosion of sovereign immunity since the 1970s and argues that legal disputes can disrupt government access to international capital markets, as foreign courts impose a financial embargo on defaulting sovereigns. These legal developments have strengthened the hands of creditors and raised the cost of default for debtors, with far-reaching consequences for government willingness to pay and the resolution of debt crises.
Also, ItalianPhilo's comment is rather correct that a certain kind of "vulture" funds have specialized in buying litigable sovereign debt.
Our case archive also shows that the market changed fundamentally in the early 1990s. A new type of plaintiff emerged: specialised distressed debt funds, which often buy debt at a discount and then sue for full repayment. Hedge funds now account for two-thirds of all new cases. The lawsuits they file are typically larger, less likely to be settled early on, and involve multiple attempts to attach sovereign assets abroad or interrupt the government’s capital market access.
Argentina became a hallmark of the phenomenon in no small part because the default itself was absolutely huge, $80-$100 billion (yeah, sources don't even quite agree how much it was) so the absolute dollar value of the haircuts was something some found worth fighting for.
Also, while some claim the "vulture" practices are new, they are apparently only so with respect to the 20th century. Some research reports that in the Victorian era the practices in London were similar, and that they were an improvement over simply sending a fleet to shell the ports of the debtor(s). The somewhat modified practice of imposing a blockade or taking prizes at sea for non-payment persisted in the early 20th century, by the way, e.g. Venezuelan crisis of 1902–1903. (The fact that the franchise was rather narrow in most European countries at the time, i.e. mostly only the rich could vote, probably had something to do with the ease of lobbying the government[s] to send over a fleet to recover debt owed to private notables.)
