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Full-Text Articles in Securities Law
Targeted Subordination Of Official Sector Debt, Lee C. Buchheit, Mitu Gulati
Targeted Subordination Of Official Sector Debt, Lee C. Buchheit, Mitu Gulati
Faculty Scholarship
If Greece’s debt is unsustainable, and most observers (including the IMF) seem to think it is, the country’s only source of funding will continue to be official sector bailout loans. Languishing for a decade or more as a ward of the official sector is undesirable from all perspectives. The Greeks bridle under what they see as foreign imposed austerity; the taxpayers who fund the official sector loans to Greece balk at the prospect of shoveling good money after bad. The question then is how to facilitate Greece’s ability to tap the private capital markets at tolerable interest rates. The IMF’s …
A People’S History Of Collective Action Clauses, Mark C. Weidemaier, Mitu Gulati
A People’S History Of Collective Action Clauses, Mark C. Weidemaier, Mitu Gulati
Faculty Scholarship
For two decades, collective action clauses (CACs) have been part of the official-sector response to sovereign debt crisis, justified by claims that these clauses can help prevent bailouts and shift the burden of restructuring onto the private sector. Reform efforts in the 1990s and 2000s focused on CACs. So do efforts in the Eurozone today. CACs have even been suggested as the cure for the US municipal bond market. But bonds without CACs are still issued in major markets, so reformers feel obliged to explain why they know better. Over time, a narrative has emerged to justify pro-CAC reforms. It …
Santa Anna And His Black Eagle: The Origins Of Pari Passu?, Benjamin Chabot, Mitu Gulati
Santa Anna And His Black Eagle: The Origins Of Pari Passu?, Benjamin Chabot, Mitu Gulati
Faculty Scholarship
One of the most debated issues in international finance is the meaning of the pari passu clause in sovereign bonds. The clause is ubiquitous; it is in almost every single foreign-law sovereign bond out there. Yet, almost no one seems to agree on its meaning. One way to cut the Gordian knot is to track down the origins of the clause. Modern lawyers may have simply copied the clause from the documents of their predecessors without understanding its meaning. But surely the people who first drafted the clause knew what it meant. Four enterprising students at Duke Law School may …
The Greek Debt Restructuring: An Autopsy, Jeromin Zettelmeyer, Christoph Trebesch, Mitu Gulati
The Greek Debt Restructuring: An Autopsy, Jeromin Zettelmeyer, Christoph Trebesch, Mitu Gulati
Faculty Scholarship
The Greek debt restructuring of 2012 stands out in the history of sovereign defaults. It achieved very large debt relief—over 50 percent of 2012 GDP—with minimal financial disruption, using a combination of new legal techniques, exceptionally large cash incentives, and official sector pressure on key creditors. But it did so at a cost. The timing and design of the restructuring left money on the table from the perspective of Greece, created a large risk for European taxpayers, and set precedents—particularly in its very generous treatment of holdout creditors—that are likely to make future debt restructurings in Europe more difficult.
Revisiting Sovereign Bankruptcy, Lee C. Buchheit, Anna Gelpern, Mitu Gulati, Ugo Panizza, Beatrice Weder Di Mauro, Jeromin Zettelmeyer
Revisiting Sovereign Bankruptcy, Lee C. Buchheit, Anna Gelpern, Mitu Gulati, Ugo Panizza, Beatrice Weder Di Mauro, Jeromin Zettelmeyer
Faculty Scholarship
Sovereign debt crises occur regularly and often violently. Yet there is no legally and politically recognized procedure for restructuring the debt of bankrupt sovereigns. Procedures of this type have been periodically debated, but so far been rejected, for two main reasons. First, countries have been reluctant to give up power to supranational rules or institutions, and creditors and debtors have felt that there were sufficient instruments for addressing debt crises at hoc. Second, fears that making debt easier to restructure would raise the costs and reduce the amounts of sovereign borrowing in many countries. This was perceived to be against …
Direct And Indirect U.S. Government Debt, Steven L. Schwarcz
Direct And Indirect U.S. Government Debt, Steven L. Schwarcz
Faculty Scholarship
No abstract provided.
The Dynamics Of Contract Evolution, Mitu Gulati, Stephen J. Choi, Eric A. Posner
The Dynamics Of Contract Evolution, Mitu Gulati, Stephen J. Choi, Eric A. Posner
Faculty Scholarship
Contract scholarship has given little attention to the production process for contracts. The usual assumption is that the parties will construct the contract ex nihilo, choosing all the terms so that they will maximize the surplus from the contract. In fact, parties draft most contracts by slightly modifying the terms of contracts that they have used in the past, or that other parties have used in related transactions. A small literature on boilerplate recognizes this phenomenon, but little empirical work examines the process. This Article provides an empirical analysis by drawing on a data set of sovereign bonds. The authors …
Political Risk And Sovereign Debt Contracts, Mitu Gulati, Stephen J. Choi, Eric A. Posner
Political Risk And Sovereign Debt Contracts, Mitu Gulati, Stephen J. Choi, Eric A. Posner
Faculty Scholarship
Default on sovereign debt is a form of political risk. Issuers and creditors have responded to this risk both by strengthening the terms in sovereign debt contracts that enable creditors to enforce their debts judicially and by creating terms that enable sovereigns to restructure their debts. These apparently contradictory approaches reflect attempts to solve an incomplete contracting problem in which debtors need to be forced to repay debts in good states of the world; debtors need to be granted partial relief from debt payments in bad states; debtors may attempt to exploit divisions among creditors in order to opportunistically reduce …