Clifford Chance

ICMA consults on sovereign bonds

6 February 2014

The International Capital Market Association (ICMA) is consulting on the appropriate form of collective action clauses and pari passu provisions for sovereign bonds. Both proposals raise important issues, particularly in the context of sovereign debt restructuring. Collective action clauses can facilitate debt restructuring while, as shown by the ongoing litigation against Argentina, pari passu clauses can hinder the process. But how should the desire of a sovereign to ease the path to a debt restructuring be weighed against the entitlement of bondholders to be paid? How should the rights of the holders of different bonds be balanced? How can the risk of triggering an accelerated exit be avoided? How much say should creditors have in determining the depth and/or shape of any restructuring? How can creditor coordination be enhanced? ICMA's consultation offers bondholders the chance to have their say.

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