Sovereign debt needs strong collective action clauses – ECB paper
CACs with bond-by-bond voting fail to prevent creditor holdouts, researchers find
Only the strongest form of collective action clause (CAC), in sovereign debt is likely to achieve its aims, a European Central Bank paper finds.
In Restructuring sovereign bonds: holdouts, haircuts and the effectiveness of CACs, Chuck Fang, Julian Schumacher and Christoph Trebesch study the “holdout problem”, when creditors refuse to participate in a sovereign debt restructuring.
The authors use data on 23 episodes of sovereign bond restructurings involving foreign creditors since 1994. This
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