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EMTA Special Seminar: Further Improvements in the Market-Based Approach to Sovereign Debt Restructuring (NYC) - Sept. 28


Thursday, September 28, 2017 

Hosted by 
clifford chance 
31 West 52nd Street
New York

12:00 Noon Registration and Lunch 

12:30 p.m. - 2:15 p.m. Panel Discussion
Benu Schneider (Adjunct Senior Research Fellow, Research and Information Systems, Formerly UN Staff and Project Leader, Further Improvements in the Market-Based Approach) – Moderator

Deborah Zandstra (Clifford Chance)
Mark H. Stumpf (Arnold & Porter Kaye Scholer)
Lee Buchheit (Cleary Gottlieb Steen & Hamilton)
Whitney Debevoise (Arnold & Porter Kaye Scholer)
Hans Humes (Greylock Capital)  

This Special Seminar is part of a continuing series of panels and presentations that EMTA is pleased to sponsor on various topics of interest to Emerging Markets investors and other market participants, and is part of EMTA’s Legal & Compliance Seminars*. 

*CLE credit will be available for NY attorneys.  This seminar is non-transitional and appropriate for experienced attorneys only.  Please click here for details on EMTA’s Financial Hardship Policy.

In the early 2000’s, the introduction of collective action clauses (CACs) in international bond contracts was a significant contract-based development, designed to mitigate holdout risks by allowing for bondholder majority voting within a series of bonds.  In recent times, holdout risks, such as in the cases of Argentina and Greece, and aggressive use of litigation by holdout creditors, received renewed attention.  Significant improvements in contractual technology for bonds followed including, (i) improving CACs to allow aggregation of bondholder voting (across multiple series of bonds), known as aggregated CACs, to further mitigate holdout risk and enhance coordination across different series of bond issuances, (ii) enhanced pari passu provisions to disavow the ratable payment interpretation of pari passu clauses, and (iii) in a few cases, use of trust structures (a potential dampener on holdouts litigation).  The IMF also updated its sovereign lending policies with an increasing focus on pre-default restructurings, is reviewing its lending in arrears policy (LIA), reviewed its DSA methodologies, scrapped its systemic exemption for exceptional access lending and agreed, in certain circumstances, to tolerate official sector arrears.  

These developments have been important steps forward in improving sovereign bond contracts and the role of the IMF.  To build up on this progress, a technical study group was set up under the aegis of the FFDO-UNDESA (with participants from the fields of academia, the legal sector, as well as some representatives from international institutions, central banks, ministries of finance and the private sector).  The panel will present some identifiable incremental steps that can be taken to make further improvements in the market-based approach to sovereign debt restructuring.  The main issues covered in the UN Technical Study Group Report on Sovereign Debt Restructuring: Further Improvements in the Market-Based Approach (Click Here for the Report) are: 

  1. What needs to be done to improve information flows and would standardization of bond and loan contracts improve the architecture for sovereign debt restructuring?
  2. What further improvements can be made in provisions and clauses in bonds contracts?
  3. How can the progress in bond contracts be followed by improvements in commercial bank loan contracts? Can holdouts be prevented/reduced through contractual provisions?
  4. What advantages does a trust structure have vis-à-vis a fiscal agent in a debt restructuring? Can trust structures reduce the likelihood of holdouts?
  5. Does engagement between a debtor and its creditors have to be pre-agreed contractually?
  6. What are the issues in setting up a creditor committee for engagement between debtors and creditors?
  7. Can contingent debt instruments such as GDP-linked bonds be useful?
  8. What should be the considerations in the review of the “good faith” criterion in the IMF’s LIA policy?
  9. How does bank regulation affect sovereign debt restructuring? What are the open issues in regulation affecting sovereign debt?

Click Here for a paper by Michael Waibel (University of Cambridge) on Engagement Between Creditors and Sovereign Debtors: Guidance on Setting Up Creditor Committees.

Registration fee for EMTA Members: US$95