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1 – 10 of over 2000
Article
Publication date: 1 June 2004

Hendrik Haag and Daniel Weiβ

Bonds governed under German law would normally not contain collective action clauses, ie provisions dealing with majority decisions by bondholders by which certain bond…

Abstract

Bonds governed under German law would normally not contain collective action clauses, ie provisions dealing with majority decisions by bondholders by which certain bond terms may be altered or waived. This is because it is uncertain whether, in the absence of a statutory basis, a decision taken by a majority of bondholders would be binding upon a dissenting minority. For certain circumstances, however, a statutory basis exists in the form of a law enacted in 1899 which, during the last decades, has been very rarely used. This paper discusses in what cases the law may be invoked, what decisions can be made by bondholders and what procedural requirements must be observed for getting to a binding and unchallengeable decision.

Details

Journal of Financial Regulation and Compliance, vol. 12 no. 2
Type: Research Article
ISSN: 1358-1988

Keywords

Abstract

This article combines two sources of data to shed light on the nature of transactional legal work. The first consists of stories about contracts that circulate among elite transactional lawyers. The stories portray lawyers as ineffective market actors who are uninterested in designing superior contracts, who follow rather than lead industry standards, and who depend on governments and other outside actors to spur innovation and correct mistakes. We juxtapose these stories against a dataset of sovereign bond contracts produced by these same lawyers. While the stories suggest that lawyers do not compete or design innovative contracts, their contracts suggest the contrary. The contracts, in fact, are consistent with a market narrative in which lawyers engage in substantial innovation despite constraints inherent in sovereign debt legal work. Why would lawyers favor stories that paint them in a negative light and deny them a potent role as market actors? We conclude with some conjectures as to why this might be so.

Details

From Economy to Society? Perspectives on Transnational Risk Regulation
Type: Book
ISBN: 978-1-78190-739-9

Keywords

Book part
Publication date: 28 December 2013

Dania Thomas

The social protests on the streets of indebted sovereigns in crises across the Eurozone have made debt restructuring an imperative. Further delay in achieving this…

Abstract

The social protests on the streets of indebted sovereigns in crises across the Eurozone have made debt restructuring an imperative. Further delay in achieving this expeditiously and equitably significantly exacerbates the social costs of crises from which current and future generations will struggle to recover. This article examines the feasibility of the drastic and widespread debt restructuring needed to resolve the problem in the face of existing private law sanctions that protect individual creditor rights. It relies on an analysis of US policy in the transition to a securitized market and of key sovereign debt cases to reveal the historical contingency of private law protections. It concludes by showing that the effectiveness of private law protections have always been constrained by the overriding imperative to achieve debt sustainability with negotiated and consensual workouts. This can be achieved in the Eurozone with statutory constraints on enforcement action pending the settlement of debt workouts as suggested in a recent proposal.

Details

From Economy to Society? Perspectives on Transnational Risk Regulation
Type: Book
ISBN: 978-1-78190-739-9

Keywords

Expert briefing
Publication date: 9 April 2015

Prospects for vulture fund activity.

Article
Publication date: 17 May 2011

Peter Yeoh

The purpose of this paper is to discuss and evaluate the sovereign default restructuring options in the European Monetary Union (EMU).

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Abstract

Purpose

The purpose of this paper is to discuss and evaluate the sovereign default restructuring options in the European Monetary Union (EMU).

Design/methodology/approach

The paper examines financial policy options from a politico‐economic‐legal perspective. It relies primarily on secondary data analysis.

Findings

Sovereign default restructuring an unthinkable phenomenon in the hitherto affluent EMU could now be a possibility because of the lack of political cohesion and the realities of two‐speed European Union.

Research limitations/implications

The paper relies extensively on secondary data. Future research through empirical multiple case studies would enrich the insights of this paper.

Practical implications

Insights from the paper would be of benefit to lawmakers, financial supervisors, financial institutions and investors in general.

Originality/value

The paper's main value lies in its use of multiple lenses to evaluate a serious financial issue in the EMU.

Details

International Journal of Law and Management, vol. 53 no. 3
Type: Research Article
ISSN: 1754-243X

Keywords

Book part
Publication date: 1 March 2016

Ioannis Glinavos

This chapter seeks to explain the effects of actions in investment treaty tribunals against states in the European Periphery. The chapter examines the case of Spain and…

Abstract

Purpose

This chapter seeks to explain the effects of actions in investment treaty tribunals against states in the European Periphery. The chapter examines the case of Spain and the multiple actions brought against it due to changes in support structures for the production of solar electricity. The aim of this analysis is to test whether investor-state dispute settlement (ISDS) can further the cause of environmental sustainability.

Methodology/approach

In its opening part the chapter employs a ‘socio-legal’ methodology, showing the links between legal frameworks and the evolution of social and political norms. The chapter then adopts a ‘law and economics’ approach in presenting recent developments seeking to tease out the dynamic between legal changes, economic effects, policy reactions and dispute resolution.

Findings

While there is significant uncertainty over the strength of the legal arguments of claimants, it seems possible that they will be successful in claiming compensation from the Spanish government. Nonetheless, a win for the investors is unlikely to reverse the Spanish policy of ending support for renewables due to fiscal constraints. The conclusion is that such actions have a negative impact in terms of promoting the spread of renewables and they inhibit recovery in crisis hit nations.

Practical implications

The chapter offers context on the use of ISDS against the background of the European crisis. This analysis has wider connotations for policy design as it feeds directly into concerns about multilateral agreements under negotiation, such as TTIP.

Originality/value

This is the first comprehensive academic study of the changes in Spanish regulatory frameworks regarding clean energy incentives. It is also the first comprehensive presentation of the actions brought against Spain as a result of these changes.

Details

Lessons from the Great Recession: At the Crossroads of Sustainability and Recovery
Type: Book
ISBN: 978-1-78560-743-1

Keywords

Article
Publication date: 1 January 2006

Richard P.C. Brown and Timothy J. Bulman

The regularity of default by countries on their sovereign debt has led to the establishment of a number of evolving institutions or “Clubs”. These institutions' objective…

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Abstract

Purpose

The regularity of default by countries on their sovereign debt has led to the establishment of a number of evolving institutions or “Clubs”. These institutions' objective is to optimise the impact of imminent default or actual default on both international lending and borrowing. The purpose of this article is to discuss the informal institutions concerned with managing debt between national governments – the Paris Club, between governments and commercial banks – the London Club – and the currently ad hoc dealings with sovereign bonds.

Design/methodology/approach

The Clubs' changing approaches through the increasing depth and number of international financial crises from the Latin American debt crises of the 1980s, the Asian financial crisis of the late 1990s and the circumstances of the ex‐Soviet economies, plus the ongoing debt sub‐Saharan African debt crisis are discussed.

Findings

The shifts in the principles underlying the debt management system are manifest by the changing content of reschedulings, from simply deferring payments to actual reduction in their present value.

Practical implications

The functioning of principles of comparable treatment of all creditors are discussed with respect to the growing need for a body representing bondholders' interests.

Originality/value

The paper highlights the IMF's multiple and sometimes conflicting roles in the international financial system.

Details

International Journal of Social Economics, vol. 33 no. 1
Type: Research Article
ISSN: 0306-8293

Keywords

Expert briefing
Publication date: 8 July 2020

The proposal, which has broad cross-party support in Argentina, includes significant incentives to persuade creditors to accept it, such as a shorter grace period and a…

Details

DOI: 10.1108/OXAN-DB253777

ISSN: 2633-304X

Keywords

Geographic
Topical
Article
Publication date: 21 November 2014

Christina E. Bannier, Thomas Heidorn and Heinz-Dieter Vogel

This paper aims to provide an overview of the market for corporate and sovereign credit default swaps (CDS), with particular focus on Europe. It studies whether the…

Abstract

Purpose

This paper aims to provide an overview of the market for corporate and sovereign credit default swaps (CDS), with particular focus on Europe. It studies whether the subprime crisis of 2007/2008 and, particularly, the European debt crisis 2009/2010 led to a differential development on corporate and sovereign CDS markets and investigates the primary use (speculative risk-trading or risk-hedging) of the two markets in recent years.

Design/methodology/approach

The authors use aggregate market data on the size of the respective markets and on the structure of market participants and their changes over time to assess the main research question. They enhance existing data from public sources such as the Bank for International Settlements and Depository Trust and Clearing Corporation with their own statistics on European sovereign CDS and combine their conclusions with observations regarding standardisation efforts and regulatory changes in the CDS market.

Findings

The authors show that after the subprime crisis 2007/2008 and the European debt crisis 2009/2010, the corporate and sovereign CDS markets developed quite differently. They provide evidence that since mid-2010, market participants started to use the sovereign CDS market more strongly for speculative purposes than for risk-hedging. This shows both in the shift of risk-quality of sovereign CDS contracts and in the changing structure of market participants. The ongoing standardisation and regulation in the CDS market – leading to further increases in transparency and reductions in transaction costs – may be expected to trigger a similar change also for corporate CDS.

Originality/value

Based on a broad variety of market infrastructure data, the authors show a diverging development of corporate and sovereign CDS markets in Europe in recent years. Particularly the sovereign CDS market appears to have shifted from a risk-hedging instrument to being used more strongly for speculative risk-trading. The authors combine their findings with recent regulatory action and market standardisation schemes and draw conclusions for the future development of CDS markets.

Details

The Journal of Risk Finance, vol. 15 no. 5
Type: Research Article
ISSN: 1526-5943

Keywords

Article
Publication date: 19 January 2015

Andrea Consiglio and Stavros Zenios

This paper aims to use a risk management approach for re-profiling of sovereign debt. It develops profiles that trade off expected cost of financing alternative debt…

1508

Abstract

Purpose

This paper aims to use a risk management approach for re-profiling of sovereign debt. It develops profiles that trade off expected cost of financing alternative debt structures against their risk. The risk profiles are particularly informative for countries facing sovereign debt crisis, as they allow us to identify, with high probability, debt unsustainability. Risk profiles for two eurozone countries with excessive debt, Cyprus and Italy, were developed. In addition, risk profiles were developed for a proposal to impose debt sanctions in the Ukrainian crisis and it was shown that the financial impact could be substantial.

Design/methodology/approach

Using scenario analysis, a risk measure of the sovereign’s debt – Conditional Debt-at-Risk – was developed, and an optimization model was then used to trade off expected cost of debt financing against the Conditional Debt-at-Risk. The model is applied to three diverse settings from current crises.

Findings

The methodology traces informative risk profiles to identify sustainable debt structures. Interesting, although tentative, conclusions are drawn for the countries where the methodology was applied. Cyprus’s debt sustainability hinges on current International Monetary Fund (IMF) projections about gross domestic product growth and small deviations can push debt into unsustainable territory. For Italy, our analysis provides evidence of debt unsustainability. Common assumption of debt by eurozone member states could restore sustainability for Italy. Finally, it is shown how a proposal to impose debt sanctions against Russia for the Ukrainian crisis could have significant financial impact for Ukraine.

Research limitations/implications

Additional work is needed to calibrate the simulation models for each country separately. Nevertheless, the direction of the results is such that more careful calibration will most likely not alter the conclusions but make them stronger instead.

Practical implications

The results provide significant insights for the management of sovereign debt for Cyprus and Italy. They also show the significant positive impact on Ukrainian public finances from debt sanctions. However, the most important practical implication is to show how the proposed methodology provided a decision support tool for restructuring and rescheduling sovereign debt for crisis countries.

Social implications

There is widespread acceptance that debt restructuring has been too little and too late in recent crises failing to re-establish market access in a durable way. How to develop risk profiles for alternative debt structures has been illustrated. Debt profiles that are unsustainable can be identified, with high probability, and alternative structures proposed that restore sustainability. The methodology proposed in this paper is providing a useful tool of analysis. The topic of debt relief is currently debated widely at policy circles by the IMF and the United Nations, and the analysis of this paper provides some insightful input to the debate.

Originality/value

The use of scenario analysis for sovereign debt modeling and the use of an optimization model developed by the authors in previous research provide empirical analysis for three current problems in sovereign debt management. Useful insights are obtained for three important real-world cases for Cyprus, Italy and Ukraine.

1 – 10 of over 2000