Clauses & Controversies

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 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 which issuers are using coercive tactics in minor restructurings so as to create a precedent for their use in big ones? We put on our tinfoil hats and speculate. Producer: Leanna Doty

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 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 products. Now, at the end of 2023, we are hearing that this product is in disfavor in the markets. Why? What’s going on? Not sure we have answers – but we sure have questions and speculations. Producer: Leanna Doty

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 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 equity receivership has a long history (e.g., railroad reorganizations) and has been discussed as a potential solution to state debt crises and other areas. We talk to Nate about what an equity receivership would look like in the sovereign debt context and the advantages (and limitations) it offers. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4656147 Producer: Leanna Doty

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 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 renegotiate all of the myriad claims against it once and for all. Producer: Leanna Doty

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 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 mistakes) in the course of Argentina's 2005 and 2010 debt restructurings and about whether lessons can be drawn for the country's current debt troubles. Producer: Leanna Doty

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 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 dodgy exit amendments. Producer: Leanna Doty

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 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 now less sure. Even if HRB can block a vote on payment terms, we're wondering if Sri Lanka can use exit consents (which HRB's position is clearly too small to veto) to twist its arm into going along with a restructuring. Otherwise, why all the fuss? Clearly the judge thinks HRB creates risks to the restructuring, and the U.S. and other governments seem to agree. We try to figure out what is going on. Producer: Leanna Doty *The episode was updated to acknowledge an error made by Mitu & Mark during the recording of the podcast. Mitu & Mark reference Judge Preska instead of Judge Cote, who issued the stay.

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 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 happened are, as Elya tells us, are fascinating. Producer: Leanna Doty

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, “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 wake of China’s emergence as a major lender. In the podcast, we discuss, among other things, the general question of China’s impact on the debt restructuring processes today, the measures they use in their analyses, and what is likely to happen in the foreseeable future. Producer: Leanna Doty

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 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 follow up on it, and what they think the future of the future of these products is. Producer: Leanna Doty

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 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 funding a green transition? Kenza Bryan of the Financial Times has written extensively about SLBs and green finance in general and joins us to talk about the state of the market for SLBs, carbon credits, and green finance in general. Producer: Leanna Doty

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 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 Cleary Gottlieb, is one of the young stars of the sovereign debt field and talks to us about these deals. And since we had Ignacio with us, we seized the opportunity to also try to understand a bit more about the intriguing Hamilton Bank v. Sri Lanka case and that Registered Holder/Beneficial Owner stuff. Producer: Leanna Doty

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 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 everyone’s best interests, the ongoing US sanctions regime continues to make that impossible. Steven Bodzin of REDD Intelligence is one of the most incisive and knowledgeable observers of what’s going on in Venezuela. He joins us to help figure out the current state of play. Producer: Leanna Doty

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 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 Cuban state. Producer: Leanna Doty

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 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, and Severine Saintier, hosts of the fabulous Unpacking Contract Law podcast, who help us understand the intricacies of the case. Producer: Leanna Doty

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 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 the contrasting experience of issuing diaspora bonds in Ireland and Israel, the subject of his terrific book, “Sinews of the Nation." Producer: Leanna Doty

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 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 will grant an outright stay, but perhaps there is room for a little foot dragging...? Producer: Leanna Doty

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 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 fears, rising interest rates and China, China, China. Producer: Leanna Doty

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 from the fascinating world of US state and muni debt. Producer: Leanna Doty

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 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 Ukraine's duress argument, the U.K. Supreme Court's rulings about the borrowing capacity and authority of states and their officials, and how the law of restitution fits into all of this. Producer: Leanna Doty

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 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 a creditor who holds a claim based on a court judgment. So if Hamilton Bank gets its judgment first, it can demand payment in full. The broader lesson for the official sector should be clear. All these delays in getting official sector participation sorted out give private creditors time to opt out of a debt restructuring. If the goal is equal treatment across creditor types, maybe hurry it up a bit? Producer: Leanna Doty

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 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 faced a balance of payments crisis. He joins us to discuss lessons drawn from these experiences, how the IMF can improve, the role of China in modern debt markets, and how to improve the international debt architecture. Producer: Leanna Doty

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 tribes seem to suffer - and what sorts of reforms might improve this situation. Producer: Leanna Doty

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 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 Doty

The 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 (basically none), the consequences for diplomatic relations between the U.K. and U.S. (much more significant), and on how this episode shapes national policies regarding sovereign debt to this day. Producer: Leanna Doty

ESG 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 Doty

Debt 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 Doty

Domestic 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., Sri Lanka), the slow pace of debt restructurings under the G-20’s Common Framework (and otherwise), and the very strange debt buyback plan announced by Argentina. Producer: Leanna Doty

Ghana'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 Doty

Do 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 the context of US municipal debt by looking at the disclosures made by borrowers about whether they do or do not have bankruptcy access. In this podcast, we ask Rich about his work on local governments, fiscal constitutionalism, city power and, of course, whether access to bankruptcy is as important as theory would suggest. Producer: Leanna Doty

Fear 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 initiative, the brain child of Avinash Persaud. In today’s episode, we ask Avi about Bridgetown and related matters having to do with dealing with the impact of extreme climate events on the debt of poor and climate vulnerable countries. Producer: Leanna Doty

Bondholders 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 interesting work on this topic, including on how treaty drafters are responding to the potential impact of investment arbitration on sovereign debt. She joins us to discuss whether investment arbitration really offers much of value to investors, its potential implications for sovereign debt restructurings, and how bilateral investment treaties are addressing these topics. Producer: Leanna Doty

The 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 Doty

Lessons 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. Supreme Court decided literally hundreds of the cases, often ruling in favor of the municipality. Vincent Buccola and his co-author Allison Buccola wrote a wonderful article, The Municipal Bond Cases Revisited, reconstructing these cases. Vincent join us to talk about their findings and the implications for modern disputes (e.g., Puerto Rico). Producer: Leanna Doty

Ghana’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 full. But why would Ghana and holders of non-guaranteed bonds want this? If it is included in the restructuring, it could end up with the same treatment as everyone else, without getting better treatment on account of the guarantee. Time will tell. Producer: Leanna Doty

A 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 Suriname's debt, and how does the discovery of offshore oil complicated things? And what should we make of the recent blue bond transaction involving Barbados and the Nature Conservancy? We are skeptical of debt buybacks in general, especially when the country buys back only a fraction of debt at seemingly high prices. But maybe we are being too cynical about the blue bond deal? Sydney helps us make sense of what's going on. Producer: Leanna Doty

Please 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 fiscal agency agreement -- e.g., physically going to Luxembourg to read (but not copy) the document. And, if the investor doesn't like what they see, they have no right to return the bond. We've always been puzzled and a bit irritated at these practices but have assumed that investors are bound by the terms in the fiscal agency agreement. But... is that really so clear? If terms aren't disclosed in advance, and there is no right to return once the terms are disclosed, then it doesn't seem clear at all. Producer: Leanna Doty

Pakistan’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 Doty

Contracting 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 Russia and about risks that badly drafted choice of forum clauses can pose for investors. For instance, if the sovereign asks its own courts to declare a loan invalid, can this decision bind investors? Producer: Leanna Doty

Ukraine’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 less. But the contracts didn't explicitly confer this power, and it is a strange way to conduct a vote. Why allow an idea's proponent to count the votes before deciding which votes should count? In Ukraine's case, the reprofiling had wide creditor support, so perhaps it didn't matter all that much. But we wonder whether investors will come to regret allowing this assertion of a unilateral redesignation power to pass without objection. There will be other restructurings, where investors will be asked to make much bigger sacrifices, and where governments may just use the redesignation power as leverage. When that happens, we won't be surprised when the Ukraine example is trotted out as an informal precedent to justify this practice. Producer: Leanna Doty

Why 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 Doty

Making (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 make payments in rubles and some that didn’t. And then there is the fact that while Russia seems to have formally defaulted on many of its foreign currency obligations—therefore probably triggering cross default/acceleration provisions—it is still offering to pay everyone in rubles (regardless of whether they have the special ruble payment clause or not). Producer: Leanna Doty

Diaspora 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 talk to sovereign debt guru Steven Tepper (formerly of Arnold & Porter), who, over a thirty-year period, helped advise one of the most successful diaspora finance programs – that of Israel Bonds. Producer: Leanna Doty

It’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 say there was a lot to discuss. Nikou guides us through the economic and political context in Pakistan, the turmoil in the gilts market, and the political risk in Italy. Producer: Leanna Doty

Is 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 Doty

The 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. Tightening global financial conditions have caused lots of countries to turn to syndicated loans. We had a general understanding that this was true, but had no idea of the scope until a recent article by our guest, Chelsey Dulaney of the Wall Street Journal. She joins us to talk about how low-income countries are increasingly relying on syndicated bank loans and about the potential risks. Producer: Leanna Doty

The 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 Doty

What 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 Keynesian ideas, The Price of Peace. That question of what price the world is willing to pay for peace with Mr. Putin is front and center as the conflict in Ukraine gets bloodier and more brutal by the day. Producer: Leanna Doty

Has 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 is no, does giving bondholders this option mean Russia hasn't defaulted? If the answer is yes, do the sanctions let Russia off the hook, giving it a defense -- impossibility -- to bondholder lawsuits? And what's the point of all these sanctions anyway? We tackle these and other questions. Producer: Leanna Doty

What'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 passu injunction that would effectively block any restructuring from going forward. What gives? Has Sri Lanka stupidly bumbled its way into legal trouble? (Well, sort of... the government hasn't exactly played its cards right.) Or is this just a negotiating ploy? No guest this week. Producer: Leanna Doty