Securities Law Commons^™

'Collective Action Clauses: Sovereign Bondholders Cornered?', Joy Dey

Joy Dey

A default in its debt obligations compels a sovereign borrower to adopt drastic measures in order to contain a spiralling financial crisis. One of such steps is to restructure a debt which is in default. Every sovereign debt restructuring results in considerable loss to the claims of the bondholders, therefore, equitable measures must be adopted during debt restructuring to ensure that sovereigns do not misuse the restructuring process to their advantage, otherwise termed ‘debtor moral hazard’. However, recent spate of restructurings, especially by Latin American countries, like Argentina, Brazil, Mexico and Uruguay, have seen ingenious use of collective action clauses …