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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