CAC handed

8 June 2020 By Anna Szymanski Follow @Three_Guineas

The serial defaulter wants to put its restructuring to a creditor vote, but leave room to decide later which votes count and which don’t. That would require a tweak to a common clause designed to make bond negotiations simpler. Emerging-market borrowers would be worse off for it.

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Argentina asked its creditors in an April 21 filing for the right to “redesignate” some of its bonds in a restructuring of its debts, a tweak to the terms that would make it easier for the country to strike a deal despite opposition from some lenders.

The redesignation would let Argentina hold a vote among lenders over its proposal to exchange existing bonds for new ones, and decide at any time, including after the vote, which series of bonds are counted in the vote and which are not.

Some of Argentina’s debt includes so-called enhanced collective-action clauses, a mechanism that allows it to push through a simultaneous restructuring of multiple series of bonds if at least 75% of bondholders in aggregate agree, rather than needing that percentage for each individual outstanding bond series. It also allows for a restructuring if two-thirds in aggregate agree, along with 50% of each series.

On June 3, veteran U.S. Treasury official Mark Sobel, who helped develop enhanced collective-action clauses – wrote that Argentina could undermine them by using this redesignation power.

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