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Clifford Chance

Clifford Chance


Majority Voting for Payment Term Amendments in Sovereign Loans – Latest Addition to the International Financial Architecture

10 November 2022

On 1 November 2022, various industry bodies (including the APLMA, ICMA, IIF and the LMA) published a Guidance and Explanatory Note and a suite of specimen clauses for inclusion on a voluntary and forward-looking basis in sovereign loan agreements. Both the Guidance and Explanatory Note and specimen clauses are attached to this client briefing, and may also be accessed here.

The essential element of the policy initiative behind these specimen clauses, which are designed as 'slot in' clauses for sovereign loan agreements, is to move away from lender unanimity for payment term amendments by including majority voting provisions ('MVPs') for these purposes. These MVPs operate at a recommended majority voting threshold of 75% (i.e. below the previously typical unanimous creditor consent level but above the typical majority lender voting threshold for non-unanimity matters).

In the absence of an overarching international legal framework or treaty governing the restructuring of sovereign debt or insolvency or bankruptcy regimes which apply to sovereigns, MVPs are designed to facilitate, where necessary, the process of revisiting payment terms under sovereign loan agreements in certain situations, such as financial distress. The aim is to minimise undue delays and holdout creditor risk and to improve further the international financial architecture for resolving sovereign debt cases.

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