About | HeinOnline Law Journal Library | HeinOnline Law Journal Library | HeinOnline
LOG IN
LOG IN

35 Geo. J. Int'l L. 815 (2003-2004)
The Use of Collective Action Clauses in New York Law Bonds of Sovereign Borrowers

handle is hein.journals/geojintl35 and id is 825 raw text is: THE USE OF COLLECTIVE ACTION CLAUSES IN NEW YORK LAW BONDS OF SOVEREIGN BORROWERS MARK GUGIATrl & ANTHONY RICHARDS* I. INTRODUCTION There has recently been renewed focus on the role that collective action clauses (CACs) could play in facilitating the resolution of sovereign debt problems.' The most prominent such clause is the majority amendment clause, which allows a qualified majority of bond- holders to change the payment terms of the bond, in particular, either reducing the amounts payable or prolonging the repayment period. Given the coordination problems that may arise when borrowers encounter debt service difficulties, CACs are viewed as being the most reliable way of facilitating modifications to the terms of the bond that would be in the collective interests of bondholders. This Article provides new evidence on the usage of CACs in sover- eign bonds issued by emerging market sovereigns. In particular, we document and expand the finding by Richards and Gugiatti2 of the existence of a substantial amount of issuance by emerging market sovereigns under New York governing law that nonetheless departed from the market convention and included CACs.3 We further investi- gate the circumstances of these bond issues and document some common factors involving the law firms advising the underwriters on these deals. In each case, the legal advisor was the London office of a U.S. law firm, helping to produce this convergence of English and American legal practice. Based on correspondence with the law firms involved, it appears that this departure from convention was in some sense inadvertent. * Reserve Bank of Australia. We thank David Wall for his helpful comments and assistance in preparing this Essay. Please address any comments to Anthony Richards, Economic Group, Reserve Bank of Australia, GPO Box 3947, Sydney 2001, Australia. Phone: 61-2-95518801. Fax: 61-2-95518032. E-mail: richardsa@rba.gov.au. 1. For a more complete exposition of different types of CACs, see LEGAL DEP'T., INT'L MONETARY FUND, THE DESIGN AND EFFECTIVENESS OF COLLECTIvE ACTION CLAUSES 2-15 (2002). 2. Anthony Richards & Mark Gugiatti, Do Collective Action Clauses Influence Bond Yields? New Evidence from Emerging Markets, 6 INT'L FIN. 415 (2003). 3. The market convention obviously refers to the period before the landmark February 2003 global issue by Mexico, which has been followed by a number of other issues into the U.S. market that include CACs.

What Is HeinOnline?

HeinOnline is a subscription-based resource containing thousands of academic and legal journals from inception; complete coverage of government documents such as U.S. Statutes at Large, U.S. Code, Federal Register, Code of Federal Regulations, U.S. Reports, and much more. Documents are image-based, fully searchable PDFs with the authority of print combined with the accessibility of a user-friendly and powerful database. For more information, request a quote or trial for your organization below.



Short-term subscription options include 24 hours, 48 hours, or 1 week to HeinOnline.

Purchase Access

Contact us for annual subscription options:

Contact Us

Already a HeinOnline Subscriber?

Log In

profiles profiles most