Sovereign Debt Restructuring: Lessons from History

Kopf, Christian

doi:10.1515/9783110314526.149

Collective Action Clauses and the Restructuring of Sovereign Debt 2013

DOI: 10.1515/9783110314526.149

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Sovereign Debt Restructuring: Lessons from History

Christian Kopf¹

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2017

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The Price of Law: The Case of the Eurozone Collective Action Clauses

et al. 2017

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We analyze the price effect of the introduction of Collective Action Clauses (CACs) in all newly issued sovereign bonds of Eurozone countries as of January 1, 2013. By allowing a majority of creditors to modify payment obligations, such clauses reduce the likelihood of holdouts while facilitating strategic default by the sovereign. We find that CAC bonds trade in the secondary market at lower yields than otherwise similar no-CAC bonds. The yield differential widens in countries with worse ratings and in those with stronger legal systems. The results suggest that CACs are seen as pro-rather than anti-creditor provisions. (JEL classifications: F33, G12, H63, K12) "Collective action clauses . . . are really an international provision that is recommended the world over in case of any and all issuances in order to facilitate crisis management; not to take away, not to be in any shape hostile to a country, but to help it."Christine Lagarde, responding to a question about proposed Euro area reforms at the

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The Price of Law: The Case of the Eurozone Collective Action Clauses

et al. 2017

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Sovereign Debt Restructuring: Lessons from History

Cited by 1 publication

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The Price of Law: The Case of the Eurozone Collective Action Clauses

The Price of Law: The Case of the Eurozone Collective Action Clauses

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