Collective Action Clauses in Sovereign Bond Contracts - Encouraging Greater Use PDF Download

Author: International Monetary Fund. Policy Development and Review Dept.
Publisher: International Monetary Fund
ISBN: 1498328490
Category : Business & Economics
Languages : en
Pages : 30

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Author: Patrick S. Kenadjian
Publisher: Walter de Gruyter
ISBN: 3110314525
Category : Law
Languages : en
Pages : 280

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Book Description
The volume contains articles based on presentations given at a conference hosted by the Institute for Law and Finance of Goethe University on October 27, 2011. Collective action clauses are an example of the typical dichotomy of financial regulation: While the problems are economic in nature, the solutions need to be implemented by law. The Institute for Law and Finance strives to bring together law and finance in order to foster a better mutual understanding of both disciplines and to improve the regulation of financial markets. Thus, the organizers are particularly pleased that eminent experts from the fields of law and finance agreed to participate in the event and to share their views on and experiences with collective action clauses. The presentations given at the conference have been updated in 2012 to reflect recent developments.

Author: Sönke Häseler
Publisher:
ISBN:
Category :
Languages : en
Pages :

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Author: Kenneth Kletzer
Publisher: International Monetary Fund
ISBN: 1451855621
Category : Business & Economics
Languages : en
Pages : 26

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This paper compares the restructuring of sovereign bonds with and without collective action clauses. One conclusion is that collective action clauses can allow efficient debt renegotiation in a formal model of sovereign debt renegotiation while unanimity rules offer incentives for opportunistic behavior by bondholders that leads to inefficient outcomes. With collective action clauses, the mutual gains from renegotiation can be internalized by bondholders so that the holders of each bond issue have incentives to participate in a collective debt restructuring. The analysis abstracts from transactions costs, and the last conclusion might well be sensitive to renegotiation and coordination costs.

Author: Eric Bakilana
Publisher:
ISBN:
Category : Bonds
Languages : en
Pages : 150

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Author: Sönke Häseler
Publisher:
ISBN:
Category :
Languages : en
Pages : 42

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The universal adoption of collective action clauses (CACs) was the most promising reform proposal in recent debates on sovereign debt crisis management. Academics and the official sector had been promoting CACs at least since 1995, yet market practice did not begin to change until 2003. This delay is often attributed to investors' and sovereign borrowers' opposition to CACs.This paper evaluates the publicly stated as well as the suspected private motives of the two sides to block the spread of CACs. It draws on a wide range of existing evidence and adds some new theoretical considerations to show that there is no reason to be sceptical of CACs unless bailouts exist as an alternative crisis resolution mechanism. This conclusion may be of interest purely for the sake of historical accuracy. But more importantly, it may help to better understand and assess any potential future resistance from market participants, e.g. in the process of introducing CACs in bonds governed by German law.

Author: International Monetary Fund
Publisher: International Monetary Fund
ISBN: 1498342795
Category : Business & Economics
Languages : en
Pages : 49

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This paper identifies contractual reforms designed to address collective action problems in sovereign debt restructuring. Since any decisions regarding the design of contractual provisions will need to be made by the sovereign issuer and its creditors, it is recognized that the Fund’s primary role will be to facilitate agreement on the design and use of these provisions.

Author: International Monetary Fund. Legal Dept.
Publisher: International Monetary Fund
ISBN: 1498328482
Category : Business & Economics
Languages : en
Pages : 29

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Author: Kenneth M. Kletzer
Publisher:
ISBN:
Category :
Languages : en
Pages : 25

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This paper discusses the collective action problem in sovereign debt restructurings using a benchmark model of sovereign debt renegotiation. It considers the welfare comparison of outcomes sustainable under collective action clauses and under governing law that requires the unanimous agreement of bondholders to repayment revisions. One conclusion is that collective action clauses allow the implementation of an efficient renegotiation equilibrium for the model economy while unanimity rules provide incentives for opportunistic behavior by individual bondholders that leads to inefficient outcomes. The potential role for a multilateral sovereign debt restructuring mechanism (SDRM) is also discussed. It is argued that the establishment of an official international bankruptcy tribunal that collectively restructures all of a country's debt may not improve upon the universal adoption of collective action clauses for sovereign bond issues. With collective action clauses, mutual gains from collective renegotiation are internalized so that sufficient incentives exist for the private formation of bondholder councils to restructure various debt issues together. The approach abstracts from transactions costs, and the last conclusion might well be sensitive to renegotiation and coordination costs.

Author: International Monetary Fund. Monetary and Capital Markets Department
Publisher: International Monetary Fund
ISBN: 1498329616
Category : Business & Economics
Languages : en
Pages : 29

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