Clauses & Controversies

Back 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 fr...

Tierra 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 ultimatel...

Can 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 wa...

Equity 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 comprehensivel...

How 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...

Argentina'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...

What 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 unsu...

What 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...

China’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 sove...

China’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, “Ch...

Dodgy 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 Gil...

Are 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 provi...

Sovereign 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 issuer...

Venezuelan 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 l...

Chasing 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...

Unpacking 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 che...

Is 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 disrupti...

Hamilton 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 del...

The 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 particul...

In 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 fr...

Ukraine'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 o...

Sri 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 o...

Pakistan'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 w...

Do 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...

Why 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...