Shows
Clauses & ControversiesEp 158 ft. Mitu & MarkSome Questions, Now That it's About 3 Years Since Russia’s Default
It has now been around 3 years since Russia’s invasion of Ukraine, which prompted EU and US sanctions and a default on Russia’s external bonds. The prescription clause in these bonds says that Russia’s obligations become void unless investors make claims within three years of the date payment is due. What does it mean to “make” a “claim”? Filing a lawsuit would do the trick. What about an email requesting payment? An automated message, which the depository sends out every payment date? Should bondholders have sought an agreement tollin...2025-05-2848 minClauses & ControversiesEp 157 ft. Mitu & MarkSovereign Debt Odd & Ends
An odds and ends podcast about unrelated sovereign debt topics. First up, Venezuela. Most investors have been sitting around waiting for an eventual restructuring and lifting of US sanctions. But a handful of funds sued early, got judgments, and have spent years trying unsuccessfully to collect. If they had succeeded, they would have recovered much more than similarly-situated creditors who waited around for a restructuring deal. But they failed and, in a bizarre twist, have asked the court to vacate their judgments, effectively returning them to the creditor queue. We cry foul. Next up, another fiscally-irresponsible...2025-05-1238 minClauses & ControversiesEp 155 ft. Mitu & MarkWhat if Trump Discovers that Unpaid UK (and French) Debt From WWI?
The current administration has tossed concepts such as “special relationships” with allies out the window. The administration seems willing to apply just about any leverage it has to obtain concessions from allies, including concessions that might reduce the US debt. Seen in that light, what will happen when Trump and the Musketeers discover that the UK and France have hundred-year old unpaid debts? With interest, that unpaid debt would now amount to a few trillion dollars. Enforcing these debts would be near impossible, except that the UK and Fran...2025-03-3135 minClauses & ControversiesEp 154 ft. Mitu & MarkWhat Might a Syrian Debt Restructuring (Eventually) Look Like?
There is little doubt that Syria needs to restructure its debt, among other reasons to pave the way for rebuilding after a long and brutal civil war. It strikes us as too early to envision what that process will look like, but we can identify some of the key issues. The country owes a lot to official creditors, especially Iran and Russia. Much of this was off-books and was used for the military or otherwise to support former President Bashar al-Assad's repressive regime. Not surprisingly, we are already hearing the term "...2025-03-2437 minClauses & ControversiesEp 153 ft. Mitu & MarkUser Fees on the US Treasury Strategic Gold Crypto Reserve
Trump plans to reduce the US debt. We are missing some of the steps, but here are the ones we have identified so far:
1. Golden passports
2. Tariffs
3. Maybe not tariffs
4. Okay, tariffs
5. Something about gold
6. User fee on treasuries
7. Crypto
8. ???
We speculate about what we are missing. Maybe it’s a red Tesla?
Producer: Leanna Doty2025-03-1737 minClauses & ControversiesEp 152 ft. Mitu & MarkWhy Do We Care Who is Behind HRB’s Sri Lankan Lawsuit?
The Hamilton Bank litigation against Sri Lanka appears to be reaching the end. Or is it? The stays that were granted during restructuring talks have implications for future sovereign debt restructurings, we think. Especially Venezuela’s restructuring, which is going to be a huge undertaking. And then, there may be more drama to come in the HRB lawsuit itself. Sri Lanka says it needs more discovery, apparently to dig into whoever might be behind the lawsuit. Why?
Producer: Leanna Doty2025-03-0326 minClauses & ControversiesEp 151 ft. Sarah Carlson & Elena DuggarGreece’s (Ratings) Rise From the Ashes – Wow, but also How?
We study sovereign restructurings, which means we primarily study countries going into and struggling to get out of crisis. Serial defaulters such as Argentina and Ecuador are frequent topics on our podcasts. And given how bad things were a decade ago, and its history of frequent defaults before that, we might have expected that Greece would join Argentina and Ecuador as among our more frequent podcast topics. And, indeed, Greece is back. But not because it is back in crisis. Instead, it is because it has had a remarkable rise...2025-02-1739 minClauses & ControversiesEp 150 ft. Andrew KissnerGetting "J. Screwed" Sounds Better than Getting "Argentina'd"
In the world of corporate debt, everyone seems to be talking about "Liability Management Exercises," where a borrower, with a subset of creditors, exploits loose loan covenants in ways that leave other creditors screaming mad. Even better, these LME techniques have clever names: "trap doors," getting "J. Screwed," etc. And while the worlds of sovereign and corporate debt don't overlap all that much, we wonder if litigation over LMEs can tell us anything about sovereign debt restructurings. Alas, we don't know much about corporate debt. Thankfully, Andrew Kissner (Morrison Foerster) joins us...2025-02-0347 minClauses & ControversiesEp 149 ft. Mitu & MarkIs Sri Lanka’s Loss Reinstatement Provision a Penalty?
Two of our favorite things to talk about are innovative contract clauses and ancient illogical contract doctrines that unexpectedly bite in the ass. A few weeks ago, we walked through the Loss Reinstatement provisions for Ghana and Zambia. We asked the question of whether those provisions might run afoul of the antiquated and bizarre (to us) anti-penalty doctrines under English and New York law. English law having recently become more permissive with regards to permitting penalty type clauses – if they have a legitimate business purpose -- we speculated about whether the Zamb...2025-01-2044 minClauses & ControversiesEp 148 ft. Mitu & MarkSri Lanka's New MFC Clause — Have "Contorts" Arrived in Sovereign Debt?
The doctrine of tortious interference with contracts is one of several that sits at the intersection of tort and contract law. These "contorts" confuse law students — lawyers and law professors too! — but can be important in practice. If not anticipated, they can create problems for unsuspecting parties and lawyers. Has Sri Lanka’s novel Most Favored Creditor clause created problems for creditors who participated in the country's restructuring? The MFC clause is confusing in places. It simultaneously seems to contemplate Sri Lanka striking a deal with holdouts (after litigation ends) an...2025-01-0649 minClauses & ControversiesEp 147 ft. Paul StephanYPF and Argentina’s Contributions to International Law
Argentina owes over $16 billion in connection with its nationalization of state oil company YPF. A federal judge in the Southern District of New York is considering whether to order Argentina to hand over its shares in YPF — technically located outside the United States — to pay part of the judgment. Can it do that? Paul Stephan (Virginia) joins to talk about how foreign state property located outside the United States is (and is not) protected by the law of foreign sovereign immunity, residual common law protections, and doctrines like comity.
Producer: Leanna Doty
"Shades...2024-12-0147 min
Clauses & ControversiesEp 146 ft. Mitu & MarkThe Penalty Doctrine in Contract Law
We've never been fans of the contract law rule against penalties. Why can't parties (sophisticated ones at least) agree to suffer a penalty in the event of breach? We’d ordinarily avoid this topic, because the doctrine makes little sense and the issue doesn’t come up much in the sovereign debt world. But recently, a couple of sovereign restructurings (Ghana and Zambia) have used “Loss Reinstatement Provisions.” At least on their face, these provisions seem vulnerable to challenge under the penalty doctrine, since, if the sovereign defaults on the restructured deal, they impose a loss t...2024-11-0437 minClauses & ControversiesEp 145 ft. Mitu & MarkA New Competition For Law (and Jurisdiction)?
Jurisdictions famously compete for businesses to use their corporate law. Less discussed is the competition for having one’s law chosen to govern contracts. But it happens. Sovereign debt lawyers in England and New York can, if they have a few drinks in them, can be quite entertaining in their sniping at each other about whether English or New York law is better for sovereign issuers. And the sovereigns for their part, seem to only care about what they have done in the past, regardless of what the lawyers say or what court de...2024-10-0730 minClauses & ControversiesEp 144 ft. Nate OmanAn Execution Sale is Not a Receivership. (Right?)
Creditors of Venezuela and PDVSA, its state oil company, have forced an execution sale of PDVSA's only US asset – which happens to be the ultimate parent company of CITGO. The federal judge overseeing the process has tried to keep things orderly, but the inter-creditor fighting is getting juicy. Some lower priority creditors have filed new lawsuits in an apparent attempt to jump the queue. Now the special master overseeing the execution sale process wants the court to enjoin these lawsuits. Which strikes as us a reach – almost as if the execution sale proc...2024-09-3035 minClauses & ControversiesEp 143 ft. Mitu & MarkHamilton Bank v. Sri Lanka: What the $@#$ ?
Accusations that Hamilton Bank is a giant fraudster stealing depositor funds, bizarro requests from Hamilton to the court that other creditors be constrained in using their contract rights against it, an amicus intervention in the case to say nothing at all . . . and on and on. This case gets more and more bizarre, which makes us suspect that whatever is going on under the surface is even weirder than the (already weird) stuff that is visible to outsiders like us. What no one is discussing, though, is the “unconditional rights” provision in the trust inde...2024-09-2336 min
Business Scholarship PodcastMitu Gulati, Ugo Panizza, and Mark Weidemaier on a Podcast ExperimentMitu Gulati, professor of law at the University of Virginia; Ugo Panizza, professor of international economics at the Geneva Graduate Institute; and Mark Weidemaier, professor of law at the University of North Carolina, join the Business Scholarship Podcast to discuss their paper Obscure Contract Terms: An Inadvertent Pricing Experiment. The paper was co-authored with Stephen Choi of New York University and Robert Scott of Columbia University.
This episode is hosted by Andrew Jennings, associate professor of law at Emory University, and was edited by Brynn Radak, a law student at Emory University.2024-09-1234 minClauses & ControversiesEp 142 ft. Theo MaretZambia’s Restructuring: A Post-Mortem
Zambia’s recently concluded restructuring seemed to drag on forever, debilitated by conflicts among the various creditor groups. Why did these different groups think the others were being unreasonable in their demands? And what can we learn from what happened? Our guest is one of the keenest observers in the sovereign debt world, who followed this restructuring at the ground level, Theo Maret.
Producer: Leanna Doty2024-09-0940 minClauses & ControversiesEp 141 ft. Mitu & MarkThe Champerty Show
Ah, Champerty. Perpetual runner-up, to the doctrine of consideration, in the Stupidest Legal Rule pageant. Why do directly (e.g., via the abuse of process claim) what you can do clumsily and indirectly (by limiting an injured party’s access to finance)? But what do we know? Actually, not much. We do know that Venezuela/PDVSA won a very interesting Champerty case in the Southern District of New York. And while we know very little about Champerty, we know enough to know we don’t like the doctrine very much, even if the outcome seems defensible.
Producer: Lean...2024-09-0236 minClauses & ControversiesEp 140 ft. Zohra AhmedIMF Rescues Pakistan From the Brink of Default (Again)
Pakistan looks to be in the process of finalizing yet another IMF program. Yet again, it has been rescued from the brink of default with a bailout justified by some heroic assumptions about how a state of sustainability will magically materialize. Why? Our guest, Zohra Ahmed, of Boston University Law School, has a theory: that these bailouts (that ultimately hurt Pakistan because true economic reform never happens) are the price of consent. Specifically, consent by Pakistan to cooperate with US military interests. We discuss with Zohra both her theory and the...2024-08-2636 minClauses & ControversiesEp 139 ft. Oona HathawayA Better Way to Freeze (and Seize?) Russian Assets?
Ever since Russia invaded Ukraine in 2022, there has been talk of what international law doctrines might be utilized to induce Russia to back off. One of those doctrines that has been whispered about is now, thanks to a wonderful new article by our guest, international law guru and Yale Law professor, Oona Hathaway, is that of Countermeasures. Oona and her co authors not only explain the law of countermeasures, but argue that these legal principles naturally extend into a doctrine of “collective countermeasures”. We ask Oona about these doctrines and their scop...2024-08-1944 minClauses & ControversiesEp 138 ft. Randle DeFalcoCambodia’s Debts to the US: How “Dirty” Are They?
Roughly a half century ago, in the 1970s, the US infamously bombed Cambodia. Less known is that the US, through a “Food for Peace” program, made a series of loans to the somewhat dodgy government of General Lon Nol. The loans were made, at least in part, to assist Cambodians displaced by the bombings. Fast forward a few decades, the US government periodically asks for the debts to be paid back, with interest. Cambodia responds: Seriously, you want to get repaid for lending money to an awful government (that you helped pro...2024-08-1239 minClauses & ControversiesEp 137 ft. Joseph CotterillUkraine's Preliminary Debt Restructuring Deal
Ukraine reportedly has reached terms with a subset of its bondholders, agreeing to restructure the country's roughly $24 billion in bond debt. What to make of the deal? It seems (to our view) to be premised on the IMF's entirely unrealistic assumptions about Ukraine's future debt repayment capacity. The reports we have seen about deal terms also don't explain what will happen to some important parts of the debt stock – including that of state-owned energy company Ukrenergo. Joseph Cotterill of the Financial Times joins us to explain the basic parameters of the deal, the underlying assumptions, an...2024-08-0543 minClauses & ControversiesEp 136 ft. Andrew WilkinsonTortious Interference and Inter-Creditor Duties
Creditors in sovereign debt restructurings often complain about other creditors. And creditors often try to limit what other creditors get (at least indirectly, via most favored nations clauses, comparability of treatment, etc.). Can these efforts sometimes create a risk of liability? Does that risk even extend to official creditors? In the recent Zambian restructuring negotiations, rumor has it that the doctrine of tortious interference with contract was invoked when commercial creditors felt that official creditors were expecting them to make unrealistic sacrifices. Andrew Wilkinson (Weil, which advised the Zambia External Bondholder Steering Committee) joins us...2024-05-2043 minClauses & ControversiesEp 135 ft. Ben HellerEl Salvador’s Warrants: Bukele’s Folly?
El Salvador has issued a new bond, using part of the proceeds to buy back some bonds that mature in the relatively near term. The issuance includes a detachable warrant that pays up to an additional 4% if El Salvador does not get an IMF program in place soon (or achieve a higher credit rating). The issuance has been characterized as a way to convince investors that El Salvador really is serious about striking an IMF deal. But the whole thing strikes us as loony tunes. Which is it? We ask EM guru Ben Hell...2024-04-2933 minClauses & ControversiesEp 134 ft. Mitu & MarkThe Latest in the Argentine GDP Warrant Saga: Drafting Goof or Sneaky Drafting?
There are so many intriguing aspects of the latest installment of the Argentine GDP Warrant Saga. This time, from Judge Preska in the SDNY, Argentina scores a big, and for us, totally unexpected victory. Argentina’s lawyers, at a very late stage, discovered a magic bullet that no one seems to have realized was there. Mark doesn’t like to use the term “contractual landmine”, but he does here. Mitu applauds.
Producer: Leanna Doty2024-04-1530 minClauses & ControversiesEp 133 ft. Jerome SgardLessons from the 1980s Debt Crisis
The 1980s debt crisis began in Mexico and engulfed countries around the world, leading, via the Brady Plan, to the revival of the bond markets. Beyond that, we confess to relatively little knowledge about this fundamental episode in sovereign debt history. For so many of the leading lights of the contemporary sovereign debt world, the Latin American debt crisis was where they cut their teeth. The lessons they took from that era shaped the choices they made over the succeeding decades. Our guest is Jerome Sgard (SciencePo), who joins us to talk about his...2024-04-0844 minClauses & ControversiesEp 132 ft. Ingrid Brunk & Paul StephanA Way to Use Frozen Russian Assets to Help Ukraine?
There has been much chatter lately about a proposal from Lee Buchheit, Daleep Singh and Hugo Dixon to address concerns in Western nations about using frozen Russian assets to get Ukraine much needed war financing. One might ask why these nations are so concerned about confiscating Russian assets when they have already frozen the assets, seemingly in perpetuity. But apparently, the difference matters quite a lot. Our guests, Ingrid Brunk and Paul Stephan, are two of the most thoughtful and careful thinkers about international law and they help us understand...2024-04-0143 minClauses & ControversiesEp 131 ft. Mitu & MarkUkrenergo Confusion
Rumor has it that holders of bonds issued by Ukrenergo, the state-owned corporation that runs Ukraine's electricity distribution system, expect to get better treatment in a debt restructuring, even though their bonds are guaranteed by the state and at least arguably can be forced to vote alongside holders of Ukrainian sovereign bonds (whose votes could swamp those of the Ukrenergo investors). Do the documents for the Ukrenergo bonds allow this? Or is there some other explanation for why holders of the corporate bonds expect better treatment. We are ... confused. Do not expect clarity.
Producer: Leanna Doty2024-03-2540 minClauses & ControversiesEp 130 ft. Kejal VyasWho Benefits from Lifting Sanctions on Buying Venezuelan Bonds?
Banning U.S. parties from buying Venezuelan bonds was probably a bad idea. But was it a good idea to lift the ban last fall? Investors apparently sold the Biden administration on the idea that lifting the ban would yield big benefits: bonds had migrated into the hands of parties acting as proxies for U.S. adversaries like Russia. Lifting the ban would cause the bonds to migrate back to U.S. investors, giving them (and, indirectly, the U.S. government) a seat at the table when a restructuring eventually happens...2024-03-1835 minClauses & ControversiesEp 129 ft. Mitu & MarkThe Last Sovereign Bond in New York
Due to litigation over the PDVSA 2020 bond, all future issues of sovereign bonds in New York have been canceled, effective immediately. (PDVSA is quasi-sovereign, but whatever...) You may have heard that New York’s highest court has ruled that investors cannot enforce sovereign bonds, period. Well, maybe that's not quite what it held – okay, not even remotely – but it is how some in the market are reacting. In fact, the New York Court of Appeals did nothing unusual. It held that Venezuelan law decides whether the collateral pledge backing the PDVSA 2020 bonds is valid...2024-03-1123 minClauses & ControversiesEp 128 ft. Chris SpinkSomething Black in the Lentils at Ukrenegro
A few weeks ago, there was an announcement that some of the creditors of the Ukrainian electric company, Ukrenegro, wanted their debt restructuring talks to be separate from any broader Ukrainian debt restructuring. And the prices of the Ukrenegro bonds (backed by a sovereign guarantee) shot up. This intrigued us. Why did the market suddenly see new value in these bonds, simply because of an announcement? Our old friend, Chris Spink, one of the best sovereign debt reporters in the business, talks with us about what might be going on. We can't help...2024-03-0435 minClauses & ControversiesEp 127 ft. Lauge PoulsenBack to the Future (Again) -- Russian Frozen Assets Episode
In recent months, there has been much talk about what to do with frozen Russian assets and, in particular, whether they can be repurposed to aid Ukraine in its fight against the Russian invasion. This is not the first time that large amounts of Russian assets have been frozen though, with heated debates about whether to expropriate the frozen funds. In this podcast we talk to Professor Lauge Poulsen of UCL about one of these prior freezings, from the early 1900s. Indeed, the 1918 default of Soviet Russia on investors in...2024-02-2639 minClauses & ControversiesEp 126 ft. Mitu & MarkTierra del Fuego and Tinfoil Hats
The financial press has mostly overlooked the recent debt restructuring by Argentine province Tierra del Fuego. (To be fair, Mark has overlooked it too.) But there were aspects of the deal that might strike some as a bit coercive – like an initial proposal to pay investors who consented early more than investors who took more time, and different payments ultimately made to consenting and non-consenting creditors. Why bother using such coercive tactics, when they arguably weren't needed to get the deal done? Were the tactics even coercive? Should conspiracy theorists see a broader pattern in...2024-02-0529 minClauses & ControversiesEp 125 ft. Mitu & MarkCan Someone Explain What is Happening to SLBs?
A year and a half or so ago, we were working on a paper with UVA’s Quinn Curtis on how the promises being made in the typical “use of proceeds” Green Bonds were empty. In the course of that project, we had loads of conversations with industry insiders, who largely agreed, but said that we were studying a thing of the past. The product of the future was the sustainability linked bond (slb). Unlike boring “use of proceeds” bonds, these had real incentives and were going to replace the 1st generation simplistic...2024-01-2948 min
The Emerging Markets Podcast by TellimerSovereign debt restructuring musings with Mitu Gulati and Mark Weidemaier of Clauses and Controversies, with Patrick CurranFor this episode, Tellimer's Senior Economist Patrick Curran sits down with Mitu and Mark – professors of law at the University of Virginia and University of North Carolina and hosts of the Clauses and Controversies podcast – to discuss recent developments in the sovereign debt restructuring landscape. Mitu and Mark share their insights on Zambia's comparability of treatment fiasco, ongoing suits in Sri Lanka and Venezuela, and a potentially dodgy aspect of the Tierra Del Fuego exchange offer.
For more emerging and frontier market content, make sure to follow The Emerging Markets Podcast by Tellimer – the single point of entry to EM research and data. Edited...2024-01-2633 minClauses & ControversiesEp 124 ft. Nate OmanEquity Receiverships and Sovereign Debt
Observers of sovereign debt markets have long lamented the inability to impose restructuring terms on dissenting creditors. Indeed, there are currently several bills pending – some of which are utterly bonkers, in our view – in New York to change the law in ways that will limit holdout activity in sovereign debt cases. But what if the tools to comprehensively restructure sovereign debt are already there in New York law? Our guest, Nate Oman (William and Mary) has a new paper, Restructuring Ruritania (link below), examining the potential use of the equity receivership in this context. The equi...2024-01-2246 minClauses & ControversiesEp 123 ft. Mitu & MarkHow Much of the YPF Judgement Will Burford, Realistically, Recover?
Burford Capital, a highly sophisticated litigation finance operation, has won an enormous judgment ($16 billion, where its share is upwards of $6 billion) against the Republic of Argentina. The question is how much of this judgment Burford is realistically likely to be able to collect on. Using a recent FT Alphaville article, “Dog Catches Argentine Car” by Jay Newman as our foil, we try to break down the likelihood of Burford getting a recovery. We think a significant recovery is plausible – particularly if the new administration in Argentina decides to default and renego...2024-01-1541 minClauses & ControversiesEp 122 ft. Greg MakoffArgentina's 2001 Debt Saga Revisited
Argentina's 2001 default spawned nearly 15 years of litigation, culminating in the (in)famous pari passu injunction. Many episodes of the saga have been told in isolation, but it is complicated—FRANs, pari passu, Lock Law, RUFO, etc.—and, until recently, we didn't know of anything that captured it in full. Our guest, Greg Makoff, has written a forthcoming book that manages to tell the entire story clearly without sacrificing either the drama or the complexity. The book is Default: The Landmark Court Battle over Argentina's $100 Billion Debt Restructuring. We talk to Greg about mistakes made (many, many mist...2024-01-0846 minClauses & ControversiesEp 121 ft. Ben HellerWhat the FRAN?
This episode is on Argentina's famous FRANs (floating rate accrual notes). The notes were intended to protect holders against the risk that the country's credit would deteriorate... and boy did they ever. Due to a drafting glitch, or a simple failure of imagination, the FRANs wound up earning a few lucky (well, smart) investors somewhere around 100% annual interest. Argentina's unsuccessful effort to avoid paying also raised some entertaining questions of contract law. It's not common for sovereign states to raise the unconscionability defense. Ben Heller joins us to talk about the FRANs, with some bonus discussion of...2023-11-1342 minClauses & ControversiesEp 120 ft. Mitu & MarkWhat to Make of the Stay Order in Hamilton Reserve Bank v. Sri Lanka?
Strange things have been going on in the Hamilton Reserve Bank v. Sri Lanka case in New York federal court. Recently, in response to requests from the US and other governments, the judge agreed to stay the lawsuit for 6 months before giving HRB a judgment. We have long been confused about why HRB wants a judgment so quickly, and we're no less confused now. Does HRB have a stake big enough to block a vote to modify payment terms? We have assumed it does but are...2023-11-0639 minClauses & ControversiesEp 119 ft. Elya ZhangChina’s Defaulted War Debts
We’ve long viewed China’s defaulted debt from the first half of the twentieth century through the lens of the communist government refusing to pay back the defaulted debts of Imperial China. But historian Elya Zhang’s wonderful work on China’s debts documents how the story is much more complex and, in particular, how the Imperial debt is but a sliver of the Chinese sovereign borrowing that was subsequently defaulted on. Much of it, it turns out, was war related borrowing of various types done during the 1938-49 period. And the stories underlying what happe...2023-10-1650 minClauses & ControversiesEp 118 ft. Alexandra Zeitz & Lauren FerryChina’s Impact on Sovereign Debt Restructurings
There has been much chatter (a lot of it out of Washington) about how China is mucking up the financial architecture for sovereign debt restructurings. Given the political and strategic biases of much of the chatter, it is often hard to separate out real claims from bullshit. Political scientists, Lauren Ferry and Alexandra Zeitz, in their paper, “China, the IMF, and Sovereign Debt Crises”, have dug into the question. Using both qualitative and quantitative data, they document and describe how the debt negotiation processes for distressed countries with the IMF has materially changed in the...2023-10-0945 minClauses & ControversiesEp 117 ft. Priscila Azevedo Rocha & Todd GillespieDodgy SLBs
We’ve been intrigued by the potential of sustainability-linked bonds. In theory, they should improve on green, “use of proceeds” bonds by providing incentives for issuers to invest in emissions reductions and other climate-related objectives. That’s why many in the green finance world were excited about them. But how are they working out in practice? Priscilla Azevedo Rocha and Todd Gillespie of Bloomberg talk to us about their in-depth investigation of these creatures (with Akshat Rana). We talk about how SLBs work (or don’t work) to help ameliorate climate change, how they conducted their investigation, how we might f...2023-10-0248 minClauses & ControversiesEp 116 ft. Kenza BryanAre sustainability-linked bonds here to stay?
Sustainability-linked bonds (SLBs) tie the issuer’s payment obligations to the satisfaction of some environmental benchmark. In principle, this could be good and provide an incentive for bond issuers to set ambitious climate-related goals. In reality, SLBs have proven a bit of a bummer. They set unambitious targets, include dodgy legal terms, and provide for only a trivial increase in payments if the issuer misses its target. Recently, ESG-focused investment also has prompted political backlash by conservative politicians. Are SLBs doomed to fail, or is there hope for them to play a meaningful role in...2023-09-2544 minClauses & ControversiesEp 115 ft. Ignacio LagosSovereign Sustainability Linked Bonds: What’s Going On?
The newest product on the sovereign scene is the sustainability linked bond. The product is potentially exciting because, on its face, it seems to remedy some of the incentive problems embedded in the more commonly used “use of proceeds” green bonds. Chile and Uruguay have issued slbs with considerable fanfare. But these are two strong issuers with robust commitments to climate change. The question we are interested in is whether these instruments are providing issuers with incentives to do more for climate change than they would otherwise do. Our guest, Ignacio Lagos, of Cle...2023-09-1851 minClauses & ControversiesEp 114 ft. Steven BodzinVenezuelan Debt: The CITGO Auction, Statute of Limitations, and Other Enforcement Matters
It’s a busy time for Venezuela’s creditors. The auction process is starting for the sale of Venezuela’s ownership interest in US-based refiner CITGO. The six year statute of limitations on bond claims is coming up, and both the Maduro government and the National Assembly are trying to head off a new wave of lawsuits by giving assurances that, if bondholders hold fire, the country won’t later raise the statute of limitations as a defense. Meanwhile, although a comprehensive debt restructuring would seem to be in every...2023-08-2149 minClauses & ControversiesEp 113 ft. Rebecca BurtonChasing Payment on Old Cuban Debt
We have a great fondness on this podcast for unpaid historical debts and the attempts to litigate these. One such story is that of Cuban debts. Our guest is Rebecca Burton of Linklaters (London), who joins us to talk about the saga of CRF v. Banco Nacional de Cuba and the 2023 ruling out of the High Court in London. Among the key questions here was whether in fact CRF, a hedge fund that had consolidated a bunch of old Cuban debts, had in fact validly received authorization to be able to litigate against the...2023-08-1446 minClauses & ControversiesEp 112 ft. Timothy Dodsworth, Maggie Hemsworth & Severine SaintierUnpacking the Argentine GDP Warrants Case
In 2005 and 2010, Argentina issued GDP-linked warrants as a sweetener to investors participating in its debt restructurings. At the time, the warrants didn’t seem so sweet. Holders assigned them little value, and most got rid of the warrants for pennies on the dollar. But in April, in a lawsuit brought by hedge funds that had bought the warrants on the cheap, an English judge ruled that Argentina had dramatically underpaid on the warrants, adding nearly 1.5 billion to the amount the country owes to foreign creditors. Our guests this episode are Tim Dodsworth, Maggie Hemsworth, an...2023-08-0748 minClauses & ControversiesEp 111 ft. Dan Lainer-VosIs a Diaspora Bond a Loan or a Gift?
Contract law distinguishes contracts from promises to make a gift. Contracts are enforceable; gift promises are not. Theories supporting this distinction note that gift promises often are made in relational and non-market settings where reputational and other enforcement mechanisms work well, and where legal enforcement is less needed and might even be disruptive. Yet a literature in economic sociology shows a much blurrier boundary between gift and market transactions. One context in which this is so involves diaspora bonds issued by sovereign states. Dan Lainer-Vos (USC) joins us to talk about...2023-07-3150 min
Clauses & ControversiesEp 110 ft. Mitu & MarkHamilton Bank Redux
We have talked before about the lawsuit by Hamilton Bank against Sri Lanka, noting that Hamilton Bank is trying to avoid the effect of a restructuring. Once it gets a judgment, it will have a claim to be paid in full despite any subsequent modification of the bond. Sri Lanka seems to know this and has been raising plausible but weak legal arguments in an apparent attempt to delay the case. Now the government has outright asked the court to stay the lawsuit (though without explicitly saying what it is concerned about). We are skeptical the judge...2023-07-2424 min
Free Range with Mike LivermoreS2E11. Curtis, Gulati, and Weidemaier on Empty Green PromisesOn this episode of Free Range, host Mike Livermore is joined by UVA Law professors Quinn Curtis and Mitu Gulati, as well as UNC-Chapel Hill Law professor Mark Weidemaier, all experts in the regulation of financial markets, to discuss new paper, Green Bonds and Empty Promises.
A wide range of institutions borrow within the bond market, including municipalities, corporations, and sovereign nations. The essence of a bond is a set of promises, which include repayment terms and limits on opportunistic behavior by debtors. One new feature of the bond market is the rise of ESG (Environmental, Social, and Governance) investing...2023-06-281h 09Clauses & ControversiesEp 109 ft. Felix SalmonThe New Not Normal
Felix Salmon, the OG of sovereign debt journalism joins us for our final episode of the season. We talk to Felix about his forthcoming book, The Phoenix Economy: Work, Life, and Money in the New Not Normal. The past three years of pandemic life have changed things around the world. Felix asks what this new “not normal” is and how it might impact what is coming next. Our particular focus, of course, is on what Felix thinks is in store for us on the sovereign debt front. And there is a lot to talk about: inflation fear...2023-05-0146 minClauses & ControversiesEp 108 ft. David SchleicherIn a Bad State
The world of sovereign debt research has long given short shrift to insights that might be gained from the study of sub sovereign debt. In this episode, we talk to David Schleicher of Yale Law about his new book "In a Bad State" about the federal government's responses to various local debt crises over the past two centuries. Turns out that there are lots of lessons to be learned from the fascinating world of US state and muni debt.
Producer: Leanna Doty2023-04-2450 minClauses & ControversiesEp 107 ft. Nate OmanUkraine's Victory in the UK Supreme Court
More than three years after hearing argument, the U.K. Supreme Court finally handed down a decision in Russia's $3 billion bond dispute with Ukraine. The dispute probably shouldn't be in a domestic court at all (functionally, it is a dispute over a bilateral loan between sovereign states). But that's where it is, and the U.K. Supreme Court ruled in favor of Ukraine's duress defense, which now can go to trial. Our guest, Nate Oman (William and Mary) is a guru of contract law (and many other things). Nate helps us think through...2023-04-1753 minClauses & ControversiesEp 106 ft. Mitu & MarkSri Lanka’s Litigation Risk: Yet Another Problem With the Slow Pace of Restructurings
A while back, Sri Lanka was sued by an investor, Hamilton Bank. Early on, the lawsuit just seemed strange. Hamilton Bank’s initial claim for violation of the pari passu clause was a clear loser. Sri Lanka then raised a bizarre defense—that only the bond’s registered holder could sue. The lawsuit now involves an ordinary claim for unpaid principal. What’s going on? It seems the fight is about whether Hamilton Bank gets to escape a debt restructuring. A bond contract’s restructuring mechanism can’t affect...2023-04-1045 minClauses & ControversiesEp 105 ft. Reza BaqirPakistan's Debt Distress
Pakistan's debt distress has focused scrutiny on its debt structure, which includes lots of bilateral and official borrowing, much of it from China. The question of how to restructure Chinese lending, in relation to loan by other creditors, will be at the top of the restructuring agenda. Our guest, Reza Baqir, has both been on both sides of the table in debt workouts. He was head of the IMF’s Debt Policy division for a number of years, helping design key sovereign debt policies. He became governor of the State Bank of Pakistan in 2019 as the country fa...2023-04-0355 minClauses & ControversiesEp 104 ft. Townsend HyattDo Native American Tribes Pay Too Much to Borrow?
Recent research suggests that Native American tribes pay significantly more to borrow than their municipal counterparts. We try to unpack some of the structural reasons why this might be so with the leading legal expert on the topic, Townsend Hyatt. Townsend, a partner at Orrick, indulges our very basic questions about the pricing penalty that the tribes seem to suffer - and what sorts of reforms might improve this situation.
Producer: Leanna Doty2023-03-2744 minClauses & ControversiesEp 103 ft. Melissa ButlerWhy is the Zambian Restructuring Dragging on So?
There are finally signs of progress in Sri Lanka’s restructuring, with the various bilaterals providing “financing assurances” (whatever they are). But Zambia’s restructuring has been mired in quicksand for far longer. Sovereign debt guru Melissa Butler, of White & Case, who is an expert in Sub-Saharan Africa, joins us to talk about the situation in Zambia and the broader state of sovereign debt restructuring dysfunction. We also ask Melissa about climate resilience clauses and get to talk about her career path as a US-trained lawyer working in London.
Producer: Leanna Doty2023-03-2045 minClauses & ControversiesEp 102 ft. David GillThe Long Shadow of Default
The sovereign debt literature has somehow managed to overlook one of the biggest, most enduring debt defaults on record, involving one of the world’s richest democracies. We’re talking about the United Kingdom’s failure to pay its First World War debts owed to the United States. We talk with David Gill (University of Nottingham) about his wonderful new book, The Long Shadow of Default (Yale University Press), which focuses on the origins and consequences of this largely overlooked episode. We talk about the consequences of default for the U.K. in financial markets (basica...2023-03-1340 minClauses & ControversiesEp 101 ft. Natasha WhiteESG investing What combines existential dread (climate change) with bewildering
What counts as ESG investing? At times, it seems like almost anything could fall under that label. And does ESG investing really have the potential to drive the transition to carbon-neutrality? As sovereign debt specialists, we know only a little bit about the ESG world, and much of what we know comes from reading the work of Natasha White of Bloomberg. Natasha joins us to talk about ESG investing, debt-for-nature swaps like that conducted by Belize, and the overall direction of these markets.
Producer: Leanna Doty2023-03-0642 minClauses & ControversiesEp 100 ft. Wailin WongDebt Ceiling Drama
The drama around the U.S. debt ceiling should be low hanging fruit for a podcast about sovereign debt. But we have been unsure of the legal and economic implications. Do markets care about the debt ceiling? Is there any real risk of non-payment? Aren’t there are dozen obvious ways to borrow despite the ceiling? We ask these and other questions to expert business and economics reporter Wailin Wong, of NPR’s The Indicator from Planet Money, who is (thankfully) much less confused than we are.
Producer: Leanna Doty2023-02-2740 minClauses & ControversiesEp 99 ft. Jorgelina do Rosario & Karin StroheckerDomestic Debt, Financing Assurances, and other Fault Lines in Sovereign Debt Restructuring
Ghana’s attempts to restructure its domestic debt have been a bit of a mess, repeatedly failing to win enough creditor support before (as of this recording) finally appearing to have succeeded. But some holders of domestic bonds appear to be getting better treatment. Reuters reporters Karin Strohecker and Jorgelina do Rosario have somehow kept up with fast-developing events in Ghana, Sri Lanka, Argentina and other sovereign debt hotspots. They join us to talk about the implications of the Ghanaian domestic debt restructuring for other sovereign borrowers (e.g...2023-02-2040 minClauses & ControversiesEp 98 ft. Chelsey DulaneyGhana's Restructuring: Why the Mess?
Sovereign debt restructurings seem to be stuck in quicksand. The various players (IMF, China, commercial creditors, Paris Club, arbitration award holders, etc) each point to the others as the reason for the lack of progress. And the much ballyhooed Common Framework seems to have made little impact. Chelsey Dulaney of the Wall Street Journal joins us to talk about the state of things globally and to help dispel our confusion about what is going on in Ghana.
Producer: Leanna Doty2023-02-1337 minClauses & ControversiesEp 97 ft. Rich SchraggerDo Bondholders Care About Bankruptcy Access?
Theory tells us that bondholders care whether sovereign debtors have access to a bankruptcy process. Fear that bondholders would react to such access negatively is what tanked the IMF’s Sovereign Debt Restructuring Mechanism proposal a decade ago. But do bondholders really care about bankruptcy access, or do other things matter more? Our guest, Rich Schragger, is the author of City Power: Urban Governance in a Global Age, and an expert in local government law, urban policy, constitutional law and other matters. He also (along with Mitu) recently attempted to examine this question in th...2023-02-0655 minClauses & ControversiesEp 96 ft. Avinash PersaudFear of Fund” and the Bridgetown Initiative
Sovereign debt has been very much in the news in early 2023 thanks to a combination of factors that have exacerbated debt crises in various parts of the world. Massive COVID expenditures, increasingly extreme climate events, the emergence of China as a major lender to weaker sovereigns and the rise in global interest rates are among them. Unsurprisingly, there are lots of ideas being offered to help deal with the new problems being thrown up by the combination of these features. One of those ideas that has gotten the most traction is the Bridgetown in...2023-01-3035 minClauses & ControversiesEp 95 ft. Livia HinzBondholders Rights as a Function of Nationality Rather than Contract
Recent debt restructurings have raised the question whether some investors in sovereign debt might have additional rights (or obligations) as a result of bilateral investment treaties between their home states and the debtor state. It seems strange to think that investors from, say, Ruritania might have different rights than investors from Transylvania, even though they hold the exact same instrument, simply as a function of their nationality. Is this really the type of system that investors want? That sovereigns want? Livia Hinz of the European University Institute has done super...2023-01-2342 minClauses & ControversiesEp 94 ft. Mary ChildsThe Bond King
The name PIMCO is ubiquitous in the world of bond finance. But aside from its enormous size, why is PIMCO so important? Our guest this episode is Mary Childs, co-host of NPR's Planet Money podcast. Her book, The Bond King, tells the story of PIMCO's origins and of how Bill Gross transformed the bond markets, built PIMCO into a behemoth, and then lost power. She joins us to talk about the book and to explain PIMCO's significance to the bond markets.
Producer: Leanna Doty2023-01-1647 minClauses & ControversiesEp 93 ft. Vincent BuccolaLessons from the U.S. Municipal Bond Cases?
In a sovereign debt crisis, a government will sometimes argue that the country does not have to pay some of its debt, because it borrowed the money in violation of its own law, typically while a different government was in power. And in fact, domestic law typically does constrain the borrowing of countries and sub-sovereigns: debt ceilings, legislative approval requirements, etc. Many foundational -- though now, largely forgotten -- legal cases involving such disputes arose in the context of U.S. municipal debt. In the mid to late 1800s, the U.S...2023-01-0947 minClauses & ControversiesEp 92 ft. Mitu & MarkGhana’s 2030 FUD Bond
We learned a new term a few days ago: FUD. Apparently common in the crypto world, it refers to when panic about something spreads “fear, uncertainty and doubt.” An investor friend used the term to describe aspects of the Ghana 2030 bond. We had previously thought this bond was safe, since it benefits from a World Bank guarantee. But reading the contract terms more closely, the FUD has rubbed off on us. It isn't clear to us that the bond will escape the restructuring. Of course, it could be left out of the restructuring and be paid in ful...2022-12-1239 minClauses & ControversiesEp 91 ft. Sydney MakiA Truly Gnarly Year
Times are pretty bad for emerging markets, what with a surging dollar, interest rate increases, etc. But somehow, despite having a president with, ahem, eccentric economic views, Turkey's recent $1.5 billion bond issuance was reportedly way oversubscribed. So things are a bit weird. We've long admired and learned from the work of this week's guest, Sydney Maki of Bloomberg. Sydney joins us to talk about the state of the sovereign debt world in general and, in particular, about a couple of deals (and debt crises) that have perplexed us. What are the prospects for a restructuring of...2022-11-2842 minClauses & ControversiesEp 90 ft. Mitu & MarkPlease Sir, May I Read the Contract?
Sovereign bonds are sold after distribution of a sales document -- a prospectus or offering circular -- that describes key risk factors and that summarizes or reprints the terms and conditions of the bonds. The sales document isn't the contract, or at least not the whole thing, because it typically makes clear investors will be bound by terms found elsewhere, such as a fiscal agency agreement. But these other documents often aren't given to prospective investors. Even after buying, the investor may have to jump through hoops to get a peek at the...2022-11-2142 minClauses & ControversiesEp 89 ft. Mitu & MarkPakistan’s Bizarro 2024 Bond
Pakistan is in crisis and its bonds are in the toilet. One of its bond series though, the 2024, is not like the others. It has one of the highest CAC vote thresholds we’ve seen anywhere in the modern era. But that’s not it; best we can tell, the process by which votes are counted appears to be some weird historical holdover. How? Why? What? In this episode, we try to suss out the implications of the weirdness in the bond. Our guess: This is going to be a nightmare to restructure.
Producer: Leanna Doty2022-11-1439 minClauses & ControversiesEp 88 ft. John CoyleContracting for Home Field Advantage
Virtually all international sovereign bonds include provisions designed to make it easier for investors to sue the sovereign after default. Choice of forum clauses, waivers of sovereign immunity, provisions addressing service of process, etc. Russia is a prominent exception where these clauses are absent, and this is one of many factors making it hard for investors to decide how to respond to the country's default. John Coyle (UNC) is one of the foremost experts in how courts interpret choice of forum (and choice of law) clauses. He joins us to talk about investors' rights against...2022-11-0740 minClauses & ControversiesEp 87 ft. Mitu & MarkUkraine’s Dodgy Designations
In its recent debt reprofiling, Ukraine asserted that it had the unilateral right to “re-designate.” The context here is the operation of the aggregated collective action clause (CAC), which allows the debtor to conduct an aggregated vote across multiple series of bonds to see if a restructuring proposal gains the support of the entire group. Ukraine claimed that it had the contractual right, in its sole discretion, and after the votes were in, to decide which series of bonds to include in the restructuring. To be fair, its bond contracts did seem to allow this. More or les...2022-10-3135 minClauses & ControversiesEp 86 ft. Mitu & MarkWhy Did the Dog Not Bark? (or Why Did the Creditors Consent So Readily?)
Ukraine’s gave creditors in its 2016 restructuring GDP warrants that were bizarrely uncapped. Now, with expectations of post-war GDP shooting up, thanks to likely reconstruction support from the US and the EU, these warrants are potentially gold mines. Yet, just a couple of weeks ago, Ukraine was able to not only defer payments on them, but get agreement on in effect capping them. Why did Heartless Hedgies leave giant gobs of money on the table? What are we missing here?
Producer: Leanna Doty2022-10-2441 minClauses & ControversiesEp 85 ft. Chris SpinkMaking (Non?)Sense of the Russian CDS Auction
CDS auctions intimidate us because there is so much that we don’t understand about how they are supposed to work. But there are others who, thankfully, understand a lot more not only about CDS auctions but also how they work in contexts such as those of Russian sovereign bonds. One of those gurus is Chris Spink of the International Financing Review (and Refinitiv/Reuters Financial). The Russian auction was especially complicated because Russia had different types of dollar and euro bonds out there, some that gave Russia a conditional right to ma...2022-10-1742 minClauses & ControversiesEp 84 ft. Steven TepperDiaspora Bonds
Remittances are an important source of capital for many countries. Though remittances often flow directly to family and close relations, many countries would like to tap this pool of capital directly. Diaspora bonds offer a potential solution, allowing countries to issue bonds to nationals living abroad or to others who, for philosophical reasons, want to lend. Recently, the issue has come up for Ukraine in its attempt to defend against Russia’s invasion. Many other countries, faced with war, hurricanes, pandemics, and other crises, have tried to tap their diasporas. But engineering diaspora financing has proven difficult. We ta...2022-10-1047 minClauses & ControversiesEp 83 ft. Nikou AsgariIt’s a Mad, Mad World
Pakistan’s debt repayment prospects were dicey even before the catastrophic floods. Now, a debt restructuring seems almost inevitable (to us, anyway). Nikou Asgari is one of the Financial Times’ brilliant capital markets reporters, who covers European debt and has also covered Pakistan’s debt crisis. We had originally intended to talk mostly about Pakistan. As it happened, we recorded this episode on September 23, the day of Kwasi Kwarteng’s mini-budget announcement in the U.K. and two days before the Italian election that set Giorgia Meloni on course to becoming Prime Minister. So … let’s just s...2022-10-0337 minClauses & ControversiesEp 82 ft. Alexandra ScaggsIs the Bottom Falling Out of the EM Sovereign Debt Market?
The dollar is rising in value; interest rates are rising, borrowing costs for EM sovereigns are rising, and energy prices are rising. And then there is the continuing horrific war in Ukraine. Does this all, put together, spell disaster for the EM sovereign debt market? Alexandra Scaggs of FT Alphaville, one of our favorite financial reporters and someone who has always been able to see the big picture better than we have, joins us to talk about the state of things.
Producer: Leanna Doty2022-09-1949 minClauses & ControversiesEp 81 ft. Chelsey DulaneyThe New, New Syndicated Lending
In the 1970s and 1980s, most sovereign lending took the form of syndicated bank loans. This changed after the 1980s debt crisis and the Brady plan, so that in from the 1990s on, sovereign bond markets have supplied most emerging market borrowing needs. For the last 10-15 years, even very poor countries have tapped the bond markets. Syndicated loans still exist, of course, but are rarely used for general budgetary purposes. Although over-simplified, that’s a fairly standard way to view modern sovereign borrowing. Only it turns out that it may be no longer true. Ti...2022-09-0541 minClauses & ControversiesEp 80 ft. Larry NealThe Louisiana Purchase and the Origins of the Sovereign Bond Market
Most of us learn the story of the Louisiana Purchase as one where the key players were the political leaders, namely, Thomas Jefferson and Napoleon Bonaparte. While they were undoubtedly key, economic historian Larry Neal suggests that this transaction would probably never have occurred but for the financial creativity of a set of largely unknown bankers in London and Amsterdam who, along the way, set the foundations for the modern international sovereign bond market.
Producer: Leanna Doty2022-08-2248 minClauses & ControversiesEp 79 ft. Zach CarterWhat will the Price of Peace with Putin be?
Reparations, war debts, post-war reconstruction, controlling inflation through interest rates . . . The topics at the top of the news feed today, thanks at least in part to the actions of an autocratic European leader in engaging in an unprovoked invasion of a neighbor, invoke so many of the issues that John Maynard Keynes wrestled with almost a century ago. To talk about Keynes’ relevance to us today, and particularly in the context of the Ukraine-Russia situation, we are joined by Zach Carter, the author of the best selling book about Keynes and Ke...2022-07-1856 minClauses & ControversiesEp 78 ft. Mitu & MarkHas There Really Been a Russian Default?
The 30-day grace period recently expired on Russian bond payments due in May, and the Russian government also failed to make a late-June payment deadline on other bonds. That's a default, right? We keep getting asked that question, and we keep answering something like: "Yes. Almost certainly. It probably is almost definitely a default." And then we get strange looks. Do the sanctions imposed by the U.S. and other countries really prevent bondholders from receiving payment? Does a bondholder who opens an account to receive rubles violate the sanctions? If the answer...2022-07-0451 minClauses & ControversiesEp 77 ft. Mitu & MarkWhat's With the Lawsuit Against Sri Lanka?
Normally, holdouts keep a low profile until after a sovereign restructures its debt. For one thing, the government might not be able to pay them until after other creditors agree to reduce their claims. For another, getting a judgment quickly isn't a good strategy, since it takes a long time to collect and the post-judgment interest rate is so low. But Sri Lanka was just sued by a large holder of its bond that matures in July of this year. And the lawsuit asks not just for money damages, but for a pari...2022-06-2739 minClauses & ControversiesEp 76 ft. Vladimir WerningArgentina’s Never-Ending GDP Warrant Saga
Academics have long been fans of GDP indexed instruments as a means of smoothing out economic shocks that a sovereign might suffer. The market, however, has not yet shown much enthusiasm for these creatures. For academics, who frequently like to think that the markets are just too slow to understand their ideas, it is tempting to conclude that this is a case of “if we build it, they will come”. Argentina’s experience with its GDP warrants, however, might urge caution. Our guest is Vladimir Werning (formerly of the Argentine ministry of finance and JP Morga...2022-06-1348 min
Sovereign Debt with Jill DauchyEpisode 15: Mitu Gulati and Mark Weidemaier on Global Coordination and Sustainable FinanceMitu Gulati, John V. Ray Research Professor of Law at the University of Virginia, and Mark Weidermaier, Ralph M. Stockton, Jr. Distinguished Professor at the University of North Carolina at Chapel Hill – also hosts of the Clauses and Controversies podcast - join 'Sovereign Debt' to discuss the impact of the war in Ukraine on multilateralism, and how to increase the effectiveness of sustainable finance.2022-06-1353 minClauses & ControversiesEp 75 ft. Paolo Manasse, Matilde Faralli & Ugo PanizzaThe Value of Building a Reputation for Repaying Debts: Overstated?
A foundational question about sovereign debt markets is why, given the difficulty of enforcing against a sovereign, do sovereigns ever repay? The answer most often given is reputation. Sovereigns repay because they want to borrow again in the future. And this belief in the immense long term benefits of repaying has become an article of faith for many in the business. But how does this belief hold up against the empirics? Or, as our guests on this episode – Paolo Manasse, Matilde Faralli and Ugo Panizza -- put it in a re...2022-05-2356 minClauses & ControversiesEp 71 ft. Mitu & MarkSri Lanka, SriLankan Airlines, and...
SriLankan Airlines used to be profitable, and one of us remembers it fondly. But those days are over, and the airline will need to restructure its debt. Will its bonds be easier or harder to restructure than Sri Lanka's sovereign bonds? Because Sri Lanka guaranteed the airline's bonds, one might assume the two types of bonds--airline and sovereign--would have similar legal terms and restructuring mechanisms. But that is not the case. A number of provisions in the airline's bonds could give Sri Lanka's restructuring advisors a headache.
Producer: Leanna Doty2022-04-2635 minClauses & ControversiesEp 70 ft. Mitu & MarkHow to Destroy the Collective Action Clause?
Do the latest state-of-the-art version of CACs -- which have become standard in international bonds since 2014 – have a gaping hole in them? Surely not. Yet, a random conversation during the breaks to one of our recent podcasts made us look closer at some language in the new CACs. And that language seems to give issuers in crisis such as Sri Lanka an enormous tactical advantage in that debt restructuring that is coming up. Alas, Russia has the same advantage.
Producer: Leanna Doty2022-04-1819 minClauses & ControversiesEp 67 ft. Mitu & MarkUkraine-Russia: Who Should Have Priority to Get at Frozen Russian Assets?
Western governments have frozen over $300 billion in Russian assets. That's a lot, but the list of potential claimants against those assets is quickly expanding as the invasion continues and more are harmed. And an urgent question on the table is who should have priority to get at those assets? Russian bond holders who funded Putin's government? Ukrainian refugees whose homes have been destroyed? Families of deceased journalists? Surely, the answer is NOT: bondholders.
Producer: Leanna Doty2022-03-2845 minClauses & ControversiesEp 65 ft. Mitu & MarkRussia-Ukraine Emergency Podcast 2: Subversive Drafting or Goofs
The Russian international sovereign bonds, with their weird clauses, are a gift that keep on giving. The closer we look, the more perplexed we are about what some of these crucial clauses – such as the Alternative Payments provision, the pari passu clause, the (lack of) submission to jurisdiction – mean to say. Are they clever allocations of risk where the Russians put the risk of a sanctions regime on investors, or are they drafting goofs? Which court or tribunal gets to decide? Surely not some local court in Moscow? Beyond these weird contract clauses, the...2022-03-1451 minClauses & ControversiesEp 64 ft. Mitu & MarkIs Russian Sovereign Debt Now Worthless?
Sanctions imposed against the Russian Federation are denying it access to foreign exchange reserves, and Russian bonds, trading around par just a short while ago, are now in distressed territory. Bloomberg (quoting former-Elliott guru Jay Newman) says the bonds are worthless, emphasizing that Russia hasn't waived sovereign immunity. It turns out that there is a lot of weird stuff in the Russian bonds, although they might not be as worthless as one might think. We dive into some of the details. Also: why is Ukraine insisting that it will continue to pay its own...2022-03-0758 minClauses & ControversiesEp 49 ft. Lachlan Burn & Jeffrey GoldenFinancial Contract Design
Lachlan Burn and Jeff Golden, formerly of Linklaters and Allen & Overy, are two of the most respected lawyers in the capital markets world. Together and separately, they have been at the forefront of almost every effort over the past forty years to improve contract documentation and increase certainty in legal determination in financial transactions. In this episode, they talk with Mitu--Mark is away this week--about how contract production methods vary across jurisdictions (NY v. London, Common v. Civil Law, etc.) and the importance of institutional culture in organizations (e.g., ISDA, the FMLC) in which they have...2021-08-2359 minClauses & ControversiesEp 46 ft. Mitu & Mark(Why) Are ESG Sovereign Bonds (Such) Scams?
Environmental, social, and governance (ESG) investing is white hot. Investors are clamoring for "green" bonds, "blue" bonds, and other instruments that supposedly fund investments in socially beneficial activity. And borrowers are happy to meet the demand. Maybe too happy. Do sovereign issuers of green bonds and other ESG instruments actually promise to do anything at all with the proceeds? Would such promises be enforceable even if they were made? Color us skeptical. No guest this episode. We discuss the legal terms in sovereign green bonds... or rather, the lack of legal terms.
Producer...2021-08-0242 minClauses & ControversiesEp 40 ft. Anna GelpernVeil Piercing and State-Owned Entities
Disappointed creditors can attach a sovereign's assets when used for commercial activity in a foreign state. But much commercial activity is conducted not by the sovereign itself but by state-owned or controlled firms. In principle, this keeps assets away from creditors. But creditors have had recent success arguing they should be able to reach SOE-owned assets on the theory that the firm is the state's alter ego. Mark's recent article (linked below) tries to make sense of this somewhat incoherent area of law. Our dear friend, the incomparable Anna Gelpern, joins us to talk about...2021-05-2454 minClauses & ControversiesEp 31 ft. Mark StumpfValue Recovery Instruments: A Contrarian View
We often turn to veteran sovereign debt lawyer Mark Stumpf to help us understand the intricacies and history of the sovereign debt markets. He joins us to discuss a recent IMF report on the use of contingent debt instruments. In particular, we discuss Value Recovery Instruments, such as separately-traded GDP warrants. One view of these instruments, which appears in the IMF report and elsewhere, is that they should be standardized and easily tradable. Mark thinks this view is misguided—that VRIs should be nontransferable and bespoke. He joins us to explain why. We also ge...2021-03-2940 minClauses & ControversiesEp 20 ft. Jeromin ZettelmeyerTrees. Wrong. Barking Up.
Jeromin Zettelmeyer has done foundational research on the economics and the law of sovereign debt. We discuss the G-20's "Common Framework," recently released to lay out a mechanism for coordinating debt relief to poor nations. Jeromin explains why Mitu and Mark are critical of the wrong aspects of the Common Framework and highlights the significance of the G-20's announcement.
Producer: Leanna Doty2020-11-3057 minClauses & ControversiesEp 13 ft. Mark and MituWhat's Your Damage?
When a sovereign defaults on its debt, what should investors recover in damages? It seems to us that the conventional answer to this question is just wrong. We think. Pretty sure, actually. Well, probably. Two contracts professors who study sovereign debt discuss how they don't understand contracts damages. In sovereign debt cases.
Producer: Leanna Doty2020-10-1438 minClauses & ControversiesEp 11 ft. Mark and MituThis Episode Will Become Void in 3...2...1
Prescription clauses say bondholder claims are "void" or "prescribed" unless presented for payment within some period of time. Six months ago, we barely knew these clauses existed. Now, dueling contenders to represent the Venezuelan government are publicly arguing about what the clauses mean. We talk about Venezuela's very unusual prescription clauses. What do they mean? Actually, do the clauses even exist? No guest this episode.
The report mentioned in this episode can be found here: https://tinyurl.com/y5z2kbzu
Producer: Leanna Doty2020-10-0645 minClauses & ControversiesEp 1 ft. Mark WeidemaierVenezuela’s Oil Company is Up For Grabs – and the Absence of Ten Words in its Governing Law Clause May Decide Who Gets it
The governing law clause is perhaps the most basic provision in every contract. Yet, it is so routine that few pay attention to it. Failure to pay attention to its precise wording though can bite one in the backside as the ongoing litigation between investors in Venezuelan bonds and the government-in-exile of that country demonstrates. Mark and Mitu discuss the Venezuelan governing law clause drama, as well as a number of other similar situations that have crop...2020-08-1745 min