Clauses & Controversies

Argentina’s Never-Ending GDP Warrant Saga Academics have long been fans of GDP indexed instruments as a means of smoothing out economic shocks that a sovereign might suffer. The market, however, has not yet shown much enthusiasm for these creatures. For academics, who frequently like to think that the markets are just too slow to understand their ideas, it is tempting to conclude that this is a case of “if we build it, they will come”. Argentina’s experience with its GDP warrants, however, might urge caution. Our guest is Vladimir Werning (formerly of the Argentine ministry of finance and JP Morgan) and one of the most of the most thoughtful participants in the markets. Producer: Leanna Doty

The Value of Building a Reputation for Repaying Debts: Overstated? A foundational question about sovereign debt markets is why, given the difficulty of enforcing against a sovereign, do sovereigns ever repay? The answer most often given is reputation. Sovereigns repay because they want to borrow again in the future. And this belief in the immense long term benefits of repaying has become an article of faith for many in the business. But how does this belief hold up against the empirics? Or, as our guests on this episode – Paolo Manasse, Matilde Faralli and Ugo Panizza -- put it in a recent article (written with Francesa Caselli): What are the long term benefits of repaying when everyone else is defaulting? Their example is Columbia, widely thought to be the only large Latin American country that did not default during the 1980s. They find that Columbia benefited in the short and medium term from avoiding explicit default, but the benefit did not last the long term. Producer: Leanna Doty

Gunboats, Marines and Bonds: The Ugly US Occupation of Haiti 1915-34 The historical tie between debt and gunboat diplomacy is ugly, rooted in imperialist and racist encounters with western powers. Few examples better illustrate the point than Haiti. In the first decades of the 20th century, Haiti was still repaying the enormous debt imposed by France as a condition of recognizing the new Haitian state nearly a century earlier. Then the U.S. marines arrived. Laurent Dubois (University of Virginia) is a leading historian on Haitian colonial history and joins us to talk about the U.S. incursions into Haiti, beginning in 1914 when the marines spirited away the country's gold reserves in the dead of night for “safekeeping.” In the course of occupying Haiti, and effectively putting the country into receivership, the U.S. engineered still more lending, designed both to protect U.S. commercial interests and to reduce the influence of European investors. Producer: Leanna Doty

The Unprecedented and Odious Haitian Independence Debt Several prior episodes have explored aspects of the history of the Haitian Independence Debt of 1825, in which Haitians were effectively required to pay to pay reparations to the French for winning their own freedom. The burden of this debt persisted for more than a century, and the economic effects are still felt today. Marlene Daut (Virginia) is a specialist in Caribbean, African American, and French colonial literary and historical studies. She joins us to more fully explore the history, including how France, the United States, and other powerful states worked to ensure that the debt was repaid. Producer: Leanna Doty

Can Borrowing Costs for Tribes be Reduced? Tribal governments operate under borrowing restrictions that seem quite onerous. For example, they are limited in their ability to issue tax exempt bonds. Meanwhile, borrowing costs for tribal governments and tribal entities like casinos seem higher than warranted, at least in comparison to non-tribal counterparts. One explanation we have heard invokes legal uncertainty--for instance, about the scope and effect of a tribal government's waiver of sovereign immunity, the potential role of the federal government in a case of debt distress, and the availability of federal bankruptcy proceedings. Our guest is Kevin Washburn, Dean of Iowa Law and a leading expert in federal Indian law and the law of gaming. He joins us to talk about the relationship between the federal government and tribal nations and about ways to improve access to capital for tribal governments. Producer: Leanna Doty

Sri Lanka, SriLankan Airlines, and... SriLankan Airlines used to be profitable, and one of us remembers it fondly. But those days are over, and the airline will need to restructure its debt. Will its bonds be easier or harder to restructure than Sri Lanka's sovereign bonds? Because Sri Lanka guaranteed the airline's bonds, one might assume the two types of bonds--airline and sovereign--would have similar legal terms and restructuring mechanisms. But that is not the case. A number of provisions in the airline's bonds could give Sri Lanka's restructuring advisors a headache. Producer: Leanna Doty

How to Destroy the Collective Action Clause? Do the latest state-of-the-art version of CACs -- which have become standard in international bonds since 2014 – have a gaping hole in them? Surely not. Yet, a random conversation during the breaks to one of our recent podcasts made us look closer at some language in the new CACs. And that language seems to give issuers in crisis such as Sri Lanka an enormous tactical advantage in that debt restructuring that is coming up. Alas, Russia has the same advantage. Producer: Leanna Doty

Why do tribal casinos pay so much to borrow? The study of lending markets often overlooks borrowing by tribal governments as well as borrowing by tribal casinos. This is a relatively small part of bond markets, and lending markets more generally, but it raises important questions. For instance, it seems to us that tribal casinos -- at least the handful for which we have seen bonds and yields – pay more to borrow than non-tribal casinos. Does the difference reflect perceived credit risk? The legal uncertainties about lending to tribal entities? In this era of ESG, should investors consider whether these loans help achieve tribal development objectives? Our guest is Dave Jordan, of the Wisconsin pension fund, and he tries to educate us about the ways of this market. Producer: Leanna Doty

The Legal Weeds of Sri Lanka's International Bonds The Sri Lankan debt crisis has deepened to the point that a restructuring seems inevitable, although the government still doesn't seem willing to acknowledge this. What effect will the legal terms of the country's international bonds have on the shape of a restructuring? The contracts include a mixture of older and newer CACs (with aggregation features) and one of the stranger "limitations on liens" provisions we have seen. Andres de la Cruz (formerly of Cleary Gottlieb) has worked on some of the most complicated sovereign debt restructurings in recent decades (Greece, Argentina, Uruguay, among others). He joins us to discuss the nuances of Sri Lanka's sovereign bonds. Prepare to enter the weeds. Producer: Leanna Doty

Ukraine-Russia: Who Should Have Priority to Get at Frozen Russian Assets? Western governments have frozen over $300 billion in Russian assets. That's a lot, but the list of potential claimants against those assets is quickly expanding as the invasion continues and more are harmed. And an urgent question on the table is who should have priority to get at those assets? Russian bond holders who funded Putin's government? Ukrainian refugees whose homes have been destroyed? Families of deceased journalists? Surely, the answer is NOT: bondholders. Producer: Leanna Doty

Initiatives to Improve Sovereign Debt Markets Our guest is Deborah Zandstra of Clifford Chance, a key figure in the sovereign debt world who has been influential in initiatives to improve sovereign lending markets. She joins us to discuss the latest reforms to the Euro Collective Action Clauses and other initiatives, some positive and some (to put it politely) a bit misguided. Producer: Leanna Doty

Russia-Ukraine Emergency Podcast 2: Subversive Drafting or Goofs The Russian international sovereign bonds, with their weird clauses, are a gift that keep on giving. The closer we look, the more perplexed we are about what some of these crucial clauses – such as the Alternative Payments provision, the pari passu clause, the (lack of) submission to jurisdiction – mean to say. Are they clever allocations of risk where the Russians put the risk of a sanctions regime on investors, or are they drafting goofs? Which court or tribunal gets to decide? Surely not some local court in Moscow? Beyond these weird contract clauses, the invasion raises a host of questions that don't have clear answers. For instance, what happens to the Ukrainian debt (including debt incurred to resist the invasion) if Russia takes control of a substantial part of the country? Does it become Russian debt? Producer: Leanna Doty

Is Russian Sovereign Debt Now Worthless? Sanctions imposed against the Russian Federation are denying it access to foreign exchange reserves, and Russian bonds, trading around par just a short while ago, are now in distressed territory. Bloomberg (quoting former-Elliott guru Jay Newman) says the bonds are worthless, emphasizing that Russia hasn't waived sovereign immunity. It turns out that there is a lot of weird stuff in the Russian bonds, although they might not be as worthless as one might think. We dive into some of the details. Also: why is Ukraine insisting that it will continue to pay its own sovereign debt? Surely if any country had a good excuse for non-payment, it would be Ukraine. Producer: Leanna Doty

Sri Lanka on the Brink? Trang Nguyen, Executive Direction and Emerging Markets strategist at JP Morgan, joins us to discuss both the current state of the EM world and the precarious debt situation in Sri Lanka in particular. In the days since we recorded this episode, Ukraine was invaded and the prices of a number of commodities may shoot through the roof. It is worth asking, in that context, how much more precarious the Sri Lankan debt situation becomes if fuel costs (among other crucial items) rise by 50% or more? And how many more Sri Lankas are out there, poised to fall into default? Producer: Leanna Doty

Is There a Plan for Dealing with the Sri Lankan Debt? Sri Lanka is fast running out of foreign exchange reserves but maintains that it will pay all its debts. And it has many of those: holders of its international bonds are the largest group, but there is also debt to China, India, and other bilateral creditors. We’re puzzled why the government continues to dither in the face of growing shortages of fuel and other essential imports. Is this another case of politicians refusing to recognize the reality of a debt crisis? If not, why doesn’t the government seem to be taking any meaningful steps towards resolution (like involving the IMF). Benjamin Parkin of the Financial Times has been closely following the crisis and joins us to talk about the economic and political situation in Sri Lanka. Producer: Leanna Doty

Should we worry about increasing global (and US) debt? We confess that we do worry. But we also have heard others say this worry is misplaced. Our guest is John Cochrane of the Hoover Institution, a leading expert in financial economics and macroeconomics, who also happened to be Mitu's favorite professor at the University of Chicago. Maybe that experience (teaching Mitu) helped him develop the patience to field our questions about how to think about the current state of gargantuan sovereign debt stocks. We also talk about the merits of a shift to long-term debt financing. Producer: Leanna Doty

What's going on with Venezuela? And can we use it to talk about Blue Bonds? Venezuela has been in and out of the news. A potential forced sale of CITGO. Random creditor attempts to attach Florida assets. And a recent piece in the Financial Times about widespread environmental destruction, which requires capital (ideally in connection with a debt restructuring) to reverse. Sounds like time for another Venezuela episode. But this time, maybe with some Belize mixed in, since Belize's recent restructuring made funds available for the environment and might (to optimists, anyway) be a template for other countries. We talk with Steven Bodzin, deputy editor and Andean region reporter, and Carla Dager, ESG global lead, for REDD Intelligence, a news and information firm focusing on distressed debt and restructuring. Steven and Carla share their deep knowledge of the two countries and help us figure out what to make of recent developments. Producer: Leanna Doty

The Environmental Benefits of the Belize Restructuring There has been a lot of hype about the Belize restructuring, especially the issuance of a so-called Blue Bond and the decision to devote some of the debt savings to marine conservation. Jill Dauchy is founder and CEO of the Potomac Group, which advised The Nature Conservancy on the deal. We ask Jill about the transaction and its key players--for instance, about the importance of political risk insurance by the Development Finance Corporation. Producer: Leanna Doty

The History Behind Lawsuits Over Old Chinese and Russian Sovereign Debt Lawsuits to enforce long-defaulted Chinese bonds (by an engineer in Alabama) and Russian bonds (by the wonderfully-named Carl Marks & Co.) have a storied place in sovereign debt lore. They sit at the intersection of history, politics, and economics, mixed with a bit of law a whole lot of international intrigue. We talk with historian/geographer Elya Zhang of the University of Rochester about the back story behind these courtroom dramas and the broader history of modern Chinese sovereign debt. Producer: Leanna Doty

From Russia With ... Well, Frankly, A Bit of Concern Getting paid on an expropriation claim is difficult in the best of circumstances, even when the sovereign wants to appear hospitable to foreign investors. Russia under Vladimir Putin is not so interested in seeming hospitable. This week, we discuss the famous Yukos litigation with Paul Stephan (Virginia), whose expertise spans international law, international finance, international tax, contracts, and other fields. We also talk about Paul’s forthcoming book on what the future holds for the international legal system. Producer: Leanna Doty

From Commercial Bank Loans to Blue Bonds Sovereign debt markets have evolved significantly over the years, from syndicated bank loans, to bonds, to the current infatuation with ESG lending. Antonia Stolper (Shearman & Sterling) joins us to talk about the evolution of sovereign debt practice over the course of her eminent career. We also talk about Belize's recent debt restructuring, where some say creditors agreed to significant additional reductions in exchange for promises by Belize to invest the savings in environmental conservation projects. Antonia helps us understand what actually happened in this deal and what its implications might be for future sovereign restructurings. Producer: Leanna Doty

Does Haiti Have a Legal Right to Compensation from France? Two earlier C&C episodes explored aspects of the Haitian Independence Debt of 1825, in which Haiti agreed to pay France an "indemnity" of 150 million francs to compensate French plantation owners who had been dispossessed by Haitians' successful fight for independence. In a new paper with Kim Oosterlinck and Ugo Panizza (link below), we explore this history, its relation to the law of odious debt, and we estimate the long-term economic consequences of the debt for Haiti. (Hint: very significant.) But might Haiti have a legal right to compensation from France? In this episode, we talk with Gunther Handl (Tulane) an expert in public international law who worked on this very question in the 2000s. Many might dismiss the prospect as fantasy, but Gunther explains why Haiti is on much stronger legal footing than many would suppose. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3894623 Producer: Leanna Doty

The Domestic Costs of Imposing Capital Controls - a Constraint on Sovereign Debtors? Stephen Nelson's (Northwestern) research explores a variety of topics fundamental to sovereign debt markets, including the politics of IMF lending and the political dynamics of borrowing in developing and emerging market countries. We are huge fans of Steve and his work, which tackles important questions in unfailingly original ways. He joins us to talk about how domestic politics affects the imposition of capital controls and about the risk that IMF lending programs might lead to worse human rights outcomes. Producer: Leanna Doty

What Exactly is the Duty of Good Faith? Are the parties to sovereign debt contracts subject to a duty of good faith and fair dealing? If so, what does this mean? We have been struggling with these questions lately, especially in the context of debt restructurings that employ arguably coercive tactics (hello, Province of Buenos Aires!). The duty also may play a role in regulating the behavior of intransigent creditors. But even ignoring sovereign debt contracts, we have some fundamental questions about the duty of good faith as it applies to "ordinary" contracts. The duty can prevent parties from taking advantage of what seem to be the express terms of the contract. When does this happen, and what justifies it? Our guests are Tess Wilkinson-Ryan and David Hoffman, both brilliant contracts scholars, both of Penn Law, and both hosts of the superb Promises Promises podcast (link below). No real talk of sovereign debt contracts in this episode. Tess and Dave help us think through the role played by the duty of good faith in contract law generally. https://podcasts.apple.com/us/podcast/promises-promises/id1527875721 Producer: Leanna Doty

The Province of Buenos Aires' Restructuring The recent restructuring of the Province of Buenos Aires' multi-billion dollar debt raises many questions. Why the hardball tactics? Why did creditors cave suddenly when initially seeming to stand tough? Who were the holdouts and will they be paid in full? Will PBA's coercive tactics harm its reputation as a borrower? And who better to ask these questions than Scott Squires of Bloomberg, one of the only financial reporters to have dug deep into the legal, political, and economic details of both the Argentine republic’s restructuring and the subsequent provincial ones. Producer: Leanna Doty

Restricting Trading in Venezuela’s Sovereign Bonds: Has it Worked? The Biden administration has continued the Trump administration’s strategy of restricting trading in Venezuelan sovereign bonds as a way of bringing to heel Venezuela’s Nicholas Maduro. Has that (innovative?) strategy shown any signs of working? Thomas Laryea (Orrick, Herrington & Sutcliffe) is one of the most respected voices in the policy space on sovereign debt, with extensive experience in both the public and private sector, joins us to answer this and other questions. We ask Thomas both about what is going to happen with Venezuela’s eventual debt restructuring given the policies that have been in place for the last five years and about his evaluation of the two new mechanisms that the Official Sector put in place to deal with the debt fallout from Covid, DSSI and the Common Framework. Producer: Leanna Doty

What Do We Know About International Investment? What allows countries to borrow and to attract investment? Often the answer emphasizes the ability to make credible commitments, and this is often supposed to be easier for countries with democratic institutions. For some countries—often supposed to be those with weaker domestic institutions—agreeing to submit disputes to international investment arbitration is thought to be a way to make promises credible. Many in the civil society arena absolutely hate investment arbitration, thinking it is unfair to borrower countries. The rejoinder, of course, is that it is necessary to enable investment. As it turns out, we actually know relatively little about the factors that enable governments to make credible promises. Rachel Wellhausen (Texas) is one of the foremost experts in the political economy of international investment and finance. Her work spans the investment arbitration system, the relevance of the so-called “democratic advantage,” and other fundamental questions. She joins us to talk about the ability of governments to attract investment. Producer: Leanna Doty

Financial Contract Design Lachlan Burn and Jeff Golden, formerly of Linklaters and Allen & Overy, are two of the most respected lawyers in the capital markets world. Together and separately, they have been at the forefront of almost every effort over the past forty years to improve contract documentation and increase certainty in legal determination in financial transactions. In this episode, they talk with Mitu--Mark is away this week--about how contract production methods vary across jurisdictions (NY v. London, Common v. Civil Law, etc.) and the importance of institutional culture in organizations (e.g., ISDA, the FMLC) in which they have played key roles. Producer: Leanna Doty

Local v. Foreign Bonds? One of the classic questions in sovereign debt is why and when do sovereigns choose to issue bonds under local parameters (e.g., currency and law) versus foreign ones. And the typical answer has been: It is all about the cost of capital, dummy! In a wonderful recent article, sovereign debt guru Layna Mosely and co authors give us a fresh and original perspective on this classic question by showing the key role that the borrower government’s political philosophy also plays. In this episode, we ask Layna about her new article and also about some broader and bigger questions about the field and the different roles that political scientists, lawyers, and economists play. Producer: Leanna Doty

The Greek Restructuring of 2012 – Filling in the Gaps Greece’s restructuring of March 2012 was one of the biggest, deepest, and fastest in sovereign debt history. Much has been written about it already, but there are still significant gaps in our understanding of how matters played out on the ground. For example, how and why did the restructurers decide to move from a 75% vote requirement in each bond (the standard at the time) to a class voting mechanism (a bankruptcy model)? Were they not worried about legal risk? And what about the reversal of the threat to not pay a single cent to any holdouts? Sovereign debt guru Andrew Shutter, one of the architects of the 2012 Greek restructuring, joins us to talk about these and other questions. Producer: Leanna Doty

(Why) Are ESG Sovereign Bonds (Such) Scams? Environmental, social, and governance (ESG) investing is white hot. Investors are clamoring for "green" bonds, "blue" bonds, and other instruments that supposedly fund investments in socially beneficial activity. And borrowers are happy to meet the demand. Maybe too happy. Do sovereign issuers of green bonds and other ESG instruments actually promise to do anything at all with the proceeds? Would such promises be enforceable even if they were made? Color us skeptical. No guest this episode. We discuss the legal terms in sovereign green bonds... or rather, the lack of legal terms. Producer: Leanna Doty

Does a Good ESG Score Lower Sovereign Borrowing Costs, or Does Cheaper Credit Leave More Room to Do ESG? Lupin Rahman, senior economist at PIMCO, is one of the gurus of the sovereign debt market. She is one of the very few who can talk with deep knowledge about the details of the fine print in sovereign debt contracts, the macro context of debt markets, and the importance of various Official Sector initiatives. We ask her about all of those matters, starting with the new popularity of ESG investing, the benefits and costs of these green and social strategies for sovereigns and investors (a topic on which Lupin and her co authors have a fascinating new paper, https://jfi.pm-research.com/content/early/2021/05/01/jfi.2021.1.112.abstract ) and ending up with QE and inflation fears. Producer: Leanna Doty

What Does it Mean to Say the Treasury Market is Risk Free? The U.S. Treasury market is supposed to be boring and risk free. As a result, it is largely ignored in the literature on sovereign debt, other than being used as a measure of the risk free rate in empirical studies. Our guest on this episode, Yesha Yadav (Vanderbilt Law), disagrees. While it is true that the U.S. government is relatively unlikely to default in payment (although that hasn't stopped it from doing so on a couple of famous occasions in the past), Yesha explains that there in fact are a host of risks lurking beneath the calm surface of the U.S. Treasury market. Yesha is one of the foremost experts in financial and securities regulation and has written extensively about risks stemming from lightly-regulated high frequency trading and other sources. She joins us to talk about why it's a mistake to think of treasury markets as risk free, the pitfalls of debt buybacks, and other topics. Producer: Leanna Doty

The Sovereign Debt Acronym Show DSA, SDR, DSSI. Sovereign debt insiders love to throw acronyms around in conversation to make us outsiders feel like, well . . . outsiders. Even the non-acronyms aren't exactly self-explanatory. Who knew the Paris Club isn't really a night club where sovereign debt folks hang out at after work? Aitor Erce, superstar sovereign debt scholar and veteran of multiple key institutions in the international financial apparatus (Bank of Spain, ESM) joins us to discuss the history and contemporary relevance of these institutions and to offer some critiques of how they function. We also talk about proposals to increase IMF allocations of SDRs in response to the covid crisis. And while we have Aitor, we ask how all of these acronyms – SDRs, DSAs, etc. -- play into the G20's Common Framework. All in all, lots to talk about. We will need to have Aitor back.

Did External Finance Produce Weaker States? In the first era of bond finance (roughly 1820-1920), countries often pledged customs revenues and other collateral to back their external debt. Conventional wisdom is divided as to whether these pledges were worth anything. After all, investors couldn't seize the ports on their own, and rich countries were only sometimes willing to do it for them. Didac Queralt (Yale) has done fascinating work on the relationship between external finance and the development of state institutions. Among his surprising findings are that investors did assign value to collateral, suggesting that these pledges were more enforceable than is often assumed. But he also highlights the long-term costs. Access to external capital may have allowed states to defer the development of robust tax systems. In short, ability to tap external finance may have produced weaker and less democratic states. We talk with Didac about his research. Producer: Leanna Doty

How do Investors in Sovereign Bonds Fare? Josefin Meyer (Kiel Institute for the World Economy) is one of the young stars of the sovereign debt world. Her recent paper with Carmen Reinhart and Christoph Trebesch looks at how investors in sovereign debt fared from Waterloo to the present day (up to 2016, anyway). The paper is astonishing in scope and finds that the returns to investors in sovereign debt--notwithstanding the many (often serial) defaults and restructurings--are significantly greater than what would be predicted by standard finance models. What is driving these excess returns? Should we all be rushing out to buy Lebanese and Argentine bonds? We ask Josefin these and other questions, including what to think of current Covid-era sovereign bond yields (e.g., negative yields at present for Greece). Producer: Leanna Doty

Veil Piercing and State-Owned Entities Disappointed creditors can attach a sovereign's assets when used for commercial activity in a foreign state. But much commercial activity is conducted not by the sovereign itself but by state-owned or controlled firms. In principle, this keeps assets away from creditors. But creditors have had recent success arguing they should be able to reach SOE-owned assets on the theory that the firm is the state's alter ego. Mark's recent article (linked below) tries to make sense of this somewhat incoherent area of law. Our dear friend, the incomparable Anna Gelpern, joins us to talk about veil piercing in sovereign debt cases, and about what lies ahead in sovereign debt markets. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3801204 Producer: Leanna Doty

Covid is Just Like the _______ Crisis In the current economic context, with many worried about the risk of widespread financial distress among emerging market sovereigns, scholars and policymakers often turn to the lessons of the Latin American debt crisis of the 1980s. But is that the right precedent? Do other historical episodes, such as the Great Depression, offer more insight? Maybe the current moment is unique? Economic historian Juan Flores Zendejas is an expert on financial crisis and sovereign debt and one of the most insightful thinkers about the uses of history in understanding financial markets and international economic relations. He joins us to discuss the economic consequences of the pandemic. Producer: Leanna Doty

Can Courts Help Right Historical Wrongs? In the early 1900s, the first genocide of the 20th century occurred in what was then the colony of German Southwest Africa (now Namibia). Perpetrated by the German government, decades of widespread seizure of property and imposition of forced labor were followed by the mass killing of tens of thousands of the Ovaherero and Nama peoples. In recent years, there has been talk of reparations, but these talks have not resulted in payment. So descendants of the genocide victims filed a lawsuit in federal court in New York, which ultimately failed. Matthias Goldmann has written insightfully about that lawsuit—and about many, many other things as well. He joins us to discuss, in the first half of the episode, Germany’s colonial past in Africa and efforts to use the courts to redress historical wrongs. In the second half, we get to ask Matthias about modern sovereign debt problems, especially Mozambique’s challenge to the enforceability of loans associated with the tuna bond scandal. Producer: Leanna Doty

How China Lends Anna Gelpern and Christoph Trebesch--along with co-authors Sebastian Horn, Scott Morris, and Brad Parks--have produced a truly unprecedented study of a long-secret topic: the legal terms of the contracts governing loans by Chinese state-owned entities to borrower governments around the world. How China Lends (link below) documents a variety of innovative and unexpected contracting practices that straddle the border between "official" and "private" lending (and maybe reveal the uselessness of trying to maintain that distinction?). Anna and Christoph join us to talk about their findings, which not only shed light on the practices of Chinese lenders but offer a new model for the study of contracts generally. The paper is available here: https://www.aiddata.org/publications/how-china-lends Producer: Leanna Doty

Why Is No One Worried About the Gargantuan Euro Area Sovereign Debt? Our guest is the brilliant French economist, Anne-Laure Delatte, who is worried about the ever increasing size of European sovereign debt and the return (did it ever go away?) of the bank-sovereign doom loop. We ask Anne-Laure about the increasingly important role the ECB seems to be playing in determining European policy (again, she is worried) and whether there is a general assumption that the ECB will now and forever more serve as a backstop to the unlimited borrowing of individual Euro area nations. Finally, to get her even more worried, we ask Anne-Laure about the implications of Marine Le Pen taking the reins of power in France (we vividly remember her plan to solve the French debt problem by unilaterally converting the Euro denominated debt into Francs). Producer: Leanna Doty

Bendy Bonds Are Better (Say it Five Times Fast) Our guest this week is Ben Heller, one of the most insightful observers of the sovereign debt markets, and someone we often turn to for a sense of the investor’s perspective on the markets. Recently, Ben and a colleague published a proposal for so-called Bendy Bonds – state-contingent debt instruments that automatically give countries a short breathing spell in times of crisis. State-contingent debt is a favorite of many economists, but proposals for new instruments—like GDP-linked bonds—have generally gone nowhere. But there has been a great deal of interest in Bendy Bonds. We talk with Ben about the idea behind Bendy Bonds and about recent events in the markets such as the claim by some that the Pac Man and Redesignation strategies proposed by Argentina in its recent restructuring were innocent attempts to correct for flaws in the latest version of the ICMA CACs. Ben, who was on the key drafting committees for the ICMA CACs, gives us some rare and invaluable legislative history. https://www.hbk.com/uploads/documents/Bendy-Bonds.pdf Producer: Leanna Doty

Recent Sovereign Debt Drama. Plus: Zambia’s Weird Bond Contracts Are EU member states jointly and severally liable for EU bond debt? (No, of course not. Well, kind of…) Other than being fun at parties, what makes a “social” bond social? And has the G-20’s Common Framework removed the need to worry about a wave of defaults and restructurings in the wake of the pandemic? Our guest this week is the eminent Lee Buchheit, who kindly fields these and other off-the-wall questions from us in the first half of the show. In the second half, we talk about Zambia and what a debt restructuring in that country might look like. Actually, we talk about weird clauses in the Zambian eurobonds that might be relevant in a restructuring. Can it really be the case that Zambia can unilaterally modify its way out of debt? Producer: Leanna Doty

Green Bonds for Everyone! Matt Wirz (Wall Street Journal) helped uncover the Hunger Bond scandal in the Venezuelan debt. Conversations with Matt about why investors are willing to buy debt issued by odious regimes led to conversations about ESG, green bonds, sin stocks, and the new popularity of "green" sovereign debt. Recent sovereign debt related proposals include conducting debt for climate swaps to help countries deal with their gargantuan Covid debts. We talk with Matt about the so-called "greenium" (do investors really pay for green bonds?) and about whether all this ESG talk should be taken seriously. Call us skeptical. That said, there is a lot of talk. And where there is talk . . . Producer: Leanna Doty

Central Banks, Executive Power, and Protecting Sovereign Assets Central banks are a bit of a problem for the law of foreign sovereign immunity. From one perspective, they look like commercial actors, and sovereign immunity generally doesn’t protect commercial acts. So it would seem that a sovereign’s creditors should be able to attach central bank assets. Many have tried. But from another perspective, central banking is a quintessential government function, which the law of sovereign immunity should protect. Ingrid Wuerth (Vanderbilt) is an expert in the law of foreign sovereign immunity, and in international law in general, and joins us to talk about the protections afforded to central banks. Bonus discussion of the President’s power to unilaterally block creditors from going after a foreign sovereign’s U.S.-based assets. The paper mentioned in this episode can be found here: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3125048 Producer: Leanna Doty

Value Recovery Instruments: A Contrarian View We often turn to veteran sovereign debt lawyer Mark Stumpf to help us understand the intricacies and history of the sovereign debt markets. He joins us to discuss a recent IMF report on the use of contingent debt instruments. In particular, we discuss Value Recovery Instruments, such as separately-traded GDP warrants. One view of these instruments, which appears in the IMF report and elsewhere, is that they should be standardized and easily tradable. Mark thinks this view is misguided—that VRIs should be nontransferable and bespoke. He joins us to explain why. We also get to take advantage of Mark’s encyclopedic knowledge of sovereign debt history to discuss the Louisiana Purchase, gunboat diplomacy, and other topics. Producer: Leanna Doty

Post-Colonial Odious Debt Talk of odious debt generally asks whether the populace must repay money borrowed by a corrupt former dictator. The assumption is that the people have overthrown a domestic despot. But what about money borrowed while under colonial rule? Discussions of odious debt generally overlook this scenario. In fact, it’s generally assumed that a newly-independent state cannot disavow these debts. Likewise, the new state commits expropriation and must pay compensation if it takes back property appropriated by a colonial oppressor. Our guest is the brilliant Gregoire Mallard (the Graduate Institute), whose work inspired us to wonder why discussions of odious debt tend to overlook post-colonial obligations. Gregoire’s recent book on this and related matters, Gift Exchange: The Transnational History of a Political Idea is available at https://www.cambridge.org/core/books/gift-exchange/DF1BB308065A9D2974095A6FC6242549 Producer: Leanna Doty

The Back Story of Iraq’s Debt Restructuring Iraq after Saddam Hussein had massive, patently unpayable debts. Creditors viewed Iraqi oil exports as a valuable potential source of recovery and were chomping at the bit to get paid. Yet in the end, there were few successful creditor lawsuits and the haircuts imposed in the restructuring were among the most brutal in sovereign debt history. How did this happen? Our guest is economic historian Simon Hinrichsen, who draws on his wonderful recent research to answer our questions. Producer: Leanna Doty

What Does the U.S. Owe Haiti for La Navasse? Sovereign debt and guano go together like ... they go together well, okay? Bird poop was once so valuable as fertilizer that Peru used it as collateral for sovereign debt. It was so valuable that, in the 19th century, the United States and other countries simply claimed sovereignty over islands with guano deposits. The only real limit was that the island couldn't belong to another recognized sovereign nation. That the island was inhabited, perhaps by people who viewed themselves as part of a sovereign nation, was unimportant. La Navasse is one such island, situated roughly 35 miles off the coast of Haiti, and a source of contention between the U.S. and Haiti to this day. Our guests are the wonderful Miami Herald reporter, Jacqueline Charles, who has written about La Navasse for the Miami Herald, and our friend and brilliant colleague, Guy-Uriel Charles. Producer: Leanna Doty

Zambia's Default and Restructuring Prospects Zambia was the first African country to default on its debt in the wake of COVID-19. It has significant debt to Chinese lenders as well as bond debt held by private investors. The latter may have a big enough stake to veto a restructuring and are in no mood to make concessions, ostensibly because they worry that Chinese lenders may get favorable treatment. Tommy Stubbington, one of the terrific emerging markets reporters at the Financial Times, helps us make sense of the Zambian debt. Producer: Leanna Doty