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Would Collective Action Clauses Raise Borrowing Costs
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Book Synopsis Would Collective Action Clauses Raise Borrowing Costs? by : Barry Eichengreen
Download or read book Would Collective Action Clauses Raise Borrowing Costs? written by Barry Eichengreen and published by World Bank Publications. This book was released on 2000 with total page 22 pages. Available in PDF, EPUB and Kindle. Book excerpt: Abstract: June 2000 - Collective action clauses raise borrowing costs for low-rated borrowers and lower them for high-rated borrowers. This result holds for all developing country bonds and also for the subset of sovereign bond issuers. It is easy to say that the International Monetary Fund should not resort to financial rescue for countries in crisis; this is hard to do when there is no alternative. That is where collective action clauses come in. Collective action clauses are designed to facilitate debt restructuring by the principals - borrowers and lenders - with minimal intervention by international financial institutions. Despite much discussion of this option, there has been little action. Issuers of bonds fear that collective action clauses would raise borrowing costs. Eichengreen and Mody update earlier findings about the impact of collective action clauses on borrowing costs. It has been argued that only in the past year or so have investors focused on the presence of these provisions and that, given the international financial institutions' newfound resolve to bail in investors, they now regard these clauses with trepidation. Extending their data to 1999, Eichengreen and Mody find no evidence of such changes but rather the same pattern as before: Collective action clauses raise the costs of borrowing for low-rated issuers but reduce them for issuers with good credit ratings. Their results hold both for the full set of bonds and for bonds issued only by sovereigns. They argue that these results should reassure those who regard collective action clauses as an important element in the campaign to strengthen international financial architecture. This paper - a product of the Development Prospects Group - is part of a larger effort in the group to analyze international capital flows. The study was funded by the Bank's Research Support Budget under the research project Pricing of Bonds and Bank Loans in the Market for Developing Country Debt. The authors may be contacted at eichengr@@econ.berkeley.edu or amody@@worldbank.org.
Book Synopsis Would Collective Action Clauses Raise Borrowing Costs? An Update and Additional Results by : Ashoka Mody
Download or read book Would Collective Action Clauses Raise Borrowing Costs? An Update and Additional Results written by Ashoka Mody and published by . This book was released on 2016 with total page 18 pages. Available in PDF, EPUB and Kindle. Book excerpt: Collective action clauses raise borrowing costs for low-rated borrowers and lower them for high-rated borrowers. This result holds for all developing country bonds and also for the subset of sovereign bond issuers.It is easy to say that the International Monetary Fund should not resort to financial rescue for countries in crisis; this is hard to do when there is no alternative. That is where collective action clauses come in. Collective action clauses are designed to facilitate debt restructuring by the principals - borrowers and lenders - with minimal intervention by international financial institutions. Despite much discussion of this option, there has been little action. Issuers of bonds fear that collective action clauses would raise borrowing costs.Eichengreen and Mody update earlier findings about the impact of collective action clauses on borrowing costs. It has been argued that only in the past year or so have investors focused on the presence of these provisions and that, given the international financial institutions' newfound resolve to bail in investors, they now regard these clauses with trepidation.Extending their data to 1999, Eichengreen and Mody find no evidence of such changes but rather the same pattern as before: Collective action clauses raise the costs of borrowing for low-rated issuers but reduce them for issuers with good credit ratings. Their results hold both for the full set of bonds and for bonds issued only by sovereigns.They argue that these results should reassure those who regard collective action clauses as an important element in the campaign to strengthen international financial architecture.This paper - a product of the Development Prospects Group - is part of a larger effort in the group to analyze international capital flows. The study was funded by the Bank's Research Support Budget under the research project Pricing of Bonds and Bank Loans in the Market for Developing Country Debt. The authors may be contacted at [email protected] or [email protected].
Book Synopsis Do Enhanced Collective Action Clauses Affect Sovereign Borrowing Costs? by : Kay Chung
Download or read book Do Enhanced Collective Action Clauses Affect Sovereign Borrowing Costs? written by Kay Chung and published by . This book was released on 2020-08-07 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper analyzes the effects of including collective action clauses (CACs) and enhanced CACs in international (nondomestic law-governed) sovereign bonds on sovereigns' borrowing costs, using secondary-market bond yield spreads. Our findings indicate that inclusion of enhanced CACs, introduced in August 2014, is associated with lower borrowing costs for both noninvestment-grade and investment-grade issuers. These results suggest that market participants do not associate the use of CACs and enhanced CACs with borrowers' moral hazard, but instead consider their implied benefits of an orderly and efficient debt resolution process in case of restructuring.
Book Synopsis Bond Restructuring and Moral Hazard by : Torbjörn Becker
Download or read book Bond Restructuring and Moral Hazard written by Torbjörn Becker and published by International Monetary Fund. This book was released on 2001-08 with total page 48 pages. Available in PDF, EPUB and Kindle. Book excerpt: Many official groups have endorsed the wider use by emerging market borrowers of contract clauses which allow for a qualified majority of bondholders to restructure repayment terms in the event of financial distress. Some have argued that such clauses will be associated with moral hazard and increased borrowing costs. This paper addresses this question empirically using primary and secondary market yields and finds no evidence that the presences of collective action clauses increases yields for either higher- or lower-rated issuers. By implication, the perceived benefits from easier restructuring are at least as large as any costs from increased moral hazard.
Book Synopsis Collective Action Clauses for the Eurozone by : Michael Bradley
Download or read book Collective Action Clauses for the Eurozone written by Michael Bradley and published by . This book was released on 2014 with total page 53 pages. Available in PDF, EPUB and Kindle. Book excerpt: One of the primary policy initiatives instituted in response to the Eurozone sovereign debt crisis is a requirement that all Eurozone sovereign bonds issued after January 1, 2013 include provisions referred to as Collective Action Clauses or CACs. These CACs are intended to enable an orderly restructuring of distressed sovereign debt by allowing for a super-majority of creditors to impose restructuring terms on minority holdouts. This paper assesses the likely effect of this proposal on the borrowing costs of Eurozone countries. Economic theory makes ambiguous predictions: on the one hand, making debt easier (cheaper) to restructure could increase the propensity of governments to borrow irresponsibly, which would increase the cost of capital; on the other hand, if restructurings proceed more smoothly, creditors will receive a settlement more quickly, which would reduce the cost of capital. Since this is ultimately an empirical issue, we have assembled a database consisting of over 900 sovereign bonds, issued by more than 75 countries, from 1990 through 2010. Relying on this database we demonstrate that the majority of the existing literature is based on inadequate or inappropriate data, which has led researchers to conclude that the inclusion of a CAC either has no effect or increases the cost of capital for weaker nations and decreases the cost of capital for stronger ones. In contrast, we find that the presence of CACs leads to a lower, not higher, cost of capital, especially for below-investment grade bonds.
Book Synopsis Bond Restructuring and Moral Hazard by : Torbjorn Becker
Download or read book Bond Restructuring and Moral Hazard written by Torbjorn Becker and published by . This book was released on 2005 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt: Many official groups (such as the G-7, G-10 and G-22 groups of countries) have recently endorsed the wider use by emerging market borrowers of quot;collective action clausesquot;, (CACs) in bond contracts. These clauses allow for a qualified majority of bondholders to restructure repayment terms in the event of financial distress, and to make these changes binding on dissenting bondholders. Proponents of CACs maintain that facilitating restructuring can reduce deadweight losses and benefit both borrowers and lenders. However, some have argued that such clauses will be associated with moral hazard, more frequent restructurings, and increased borrowing costs.This paper examines the important and unresolved question of how CACs are viewed and priced by financial markets, and whether the benefits of more orderly restructuring might outweigh the possible effects of borrower moral hazard. The main innovation of this paper is that it is the first to do a systematic study of the secondary market yields of a large sample of bonds issued in international markets. Secondary market data allow the researcher to analyze the pricing of a large number of existing bonds at particular points in time, including before and after different events that may have caused a reassessment of the costs and benefits of bond contracts that include CACs. For comparison with some earlier studies, we also estimate equations using primary market data for yields at the time of issuance. We find no evidence that the presence of CACs increases yields for either higher- or lower-rated issuers. Hence, we conclude that the perceived benefits of lower restructuring costs associated with CACs are at least as large as any costs from increased moral hazard.
Author :International Monetary Fund. Policy Development and Review Dept. Publisher :International Monetary Fund ISBN 13 :1498328490 Total Pages :30 pages Book Rating :4.4/5 (983 download)
Book Synopsis Collective Action Clauses in Sovereign Bond Contracts - Encouraging Greater Use by : International Monetary Fund. Policy Development and Review Dept.
Download or read book Collective Action Clauses in Sovereign Bond Contracts - Encouraging Greater Use written by International Monetary Fund. Policy Development and Review Dept. and published by International Monetary Fund. This book was released on 2002-06-06 with total page 30 pages. Available in PDF, EPUB and Kindle. Book excerpt: NULL
Book Synopsis Crisis Resolution by : Barry J. Eichengreen
Download or read book Crisis Resolution written by Barry J. Eichengreen and published by . This book was released on 2003 with total page 64 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Collective Action Clauses and the Restructuring of Sovereign Debt by : Patrick S. Kenadjian
Download or read book Collective Action Clauses and the Restructuring of Sovereign Debt written by Patrick S. Kenadjian and published by Walter de Gruyter. This book was released on 2013-08-01 with total page 280 pages. Available in PDF, EPUB and Kindle. Book excerpt: The volume contains articles based on presentations given at a conference hosted by the Institute for Law and Finance of Goethe University on October 27, 2011. Collective action clauses are an example of the typical dichotomy of financial regulation: While the problems are economic in nature, the solutions need to be implemented by law. The Institute for Law and Finance strives to bring together law and finance in order to foster a better mutual understanding of both disciplines and to improve the regulation of financial markets. Thus, the organizers are particularly pleased that eminent experts from the fields of law and finance agreed to participate in the event and to share their views on and experiences with collective action clauses. The presentations given at the conference have been updated in 2012 to reflect recent developments.
Book Synopsis Sovereign Debt Restructurings 1950-2010 by : Mr.Udaibir S. Das
Download or read book Sovereign Debt Restructurings 1950-2010 written by Mr.Udaibir S. Das and published by International Monetary Fund. This book was released on 2012-08-01 with total page 128 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper provides a comprehensive survey of pertinent issues on sovereign debt restructurings, based on a newly constructed database. This is the first complete dataset of sovereign restructuring cases, covering the six decades from 1950–2010; it includes 186 debt exchanges with foreign banks and bondholders, and 447 bilateral debt agreements with the Paris Club. We present new stylized facts on the outcome and process of debt restructurings, including on the size of haircuts, creditor participation, and legal aspects. In addition, the paper summarizes the relevant empirical literature, analyzes recent restructuring episodes, and discusses ongoing debates on crisis resolution mechanisms, credit default swaps, and the role of collective action clauses.
Author :International Monetary Fund. Monetary and Capital Markets Department Publisher :International Monetary Fund ISBN 13 :1498329616 Total Pages :29 pages Book Rating :4.4/5 (983 download)
Book Synopsis Collective Action Clauses - Recent Developments and Issues by : International Monetary Fund. Monetary and Capital Markets Department
Download or read book Collective Action Clauses - Recent Developments and Issues written by International Monetary Fund. Monetary and Capital Markets Department and published by International Monetary Fund. This book was released on 2003-03-25 with total page 29 pages. Available in PDF, EPUB and Kindle. Book excerpt: NULL
Book Synopsis Global Waves of Debt by : M. Ayhan Kose
Download or read book Global Waves of Debt written by M. Ayhan Kose and published by World Bank Publications. This book was released on 2021-03-03 with total page 403 pages. Available in PDF, EPUB and Kindle. Book excerpt: The global economy has experienced four waves of rapid debt accumulation over the past 50 years. The first three debt waves ended with financial crises in many emerging market and developing economies. During the current wave, which started in 2010, the increase in debt in these economies has already been larger, faster, and broader-based than in the previous three waves. Current low interest rates mitigate some of the risks associated with high debt. However, emerging market and developing economies are also confronted by weak growth prospects, mounting vulnerabilities, and elevated global risks. A menu of policy options is available to reduce the likelihood that the current debt wave will end in crisis and, if crises do take place, will alleviate their impact.
Book Synopsis A Debt Restructuring Mechanism for Sovereigns by : Christoph G Paulus
Download or read book A Debt Restructuring Mechanism for Sovereigns written by Christoph G Paulus and published by Bloomsbury Publishing. This book was released on 2014-12-01 with total page 288 pages. Available in PDF, EPUB and Kindle. Book excerpt: The Eurozone crisis which started in spring 2010 as a Greek budget crisis has alerted Europeans that the issue of defaulting sovereigns is not one reserved just for the poor and poorest countries on this globe. The crisis painfully amplified that developed countries, too, might be hit by this phenomenon. To be sure, this insight is far from novel - the history of defaulting states reaches back into history for at least two millennia. And yet, lawyers have surprisingly abstained more or less completely from discussing this subject and developing possible solutions. Beginning with the Argentina crisis in 2001, this neglect began to vanish to a certain degree and this movement got some momentum in 2010 by the Eurozone crisis. The present book collects contributions from authors most of whom have participated in a conference on this issue in January 2012 at the Humboldt-Universität zu Berlin. The presentations, thus, provide a unique overview of the present discussion both from an economic and legal perspective.
Download or read book One from Many written by Meissner and published by Oxford University Press. This book was released on 2023-11-03 with total page 353 pages. Available in PDF, EPUB and Kindle. Book excerpt: Amid a recent surge in arguments that the global economy has begun to "de-globalize," a question has emerged: will globalization survive? In One From the Many: The Global Economy Since 1850, Christopher M. Meissner argues that based on the long-run of history, globalization will not be easily vanquished. However, globalization can only survive if humanity continues to recognize its common interests and the amazing untapped potential of further integration. At the same time, the potential adverse effects of greater integration must be acknowledged, mitigated, and minimized.
Book Synopsis Fixing Financial Crises in the 21st Century by : Andrew Haldane
Download or read book Fixing Financial Crises in the 21st Century written by Andrew Haldane and published by Routledge. This book was released on 2004-04 with total page 363 pages. Available in PDF, EPUB and Kindle. Book excerpt: This new book, with contributions from leading academics, policy-makers and practitioners goes beyond critical analysis and offers useful advice with regard to actually bringing financial crises to an end.
Book Synopsis The G8, the United Nations, and Conflict Prevention by : Radoslava N. Stefanova
Download or read book The G8, the United Nations, and Conflict Prevention written by Radoslava N. Stefanova and published by Routledge. This book was released on 2017-03-02 with total page 360 pages. Available in PDF, EPUB and Kindle. Book excerpt: This innovative and forward looking work examines the Genoa summit agenda with a view to strengthening international conflict prevention institutions and identifying and analyzing economic early warning indicators. It devotes particular attention to the Italian contribution and approach and the ways in which it can be effectively implemented following the summit. The first book to compare the role of the G8 and the United Nations in conflict prevention and human security, The G8, the United Nations, and Conflict Prevention will be essential reading for academics, government officials and members of the business and media communities.
Book Synopsis The Evolution of Transnational Rule-Makers through Crises by : Panagiotis Delimatsis
Download or read book The Evolution of Transnational Rule-Makers through Crises written by Panagiotis Delimatsis and published by Cambridge University Press. This book was released on 2023-06-30 with total page 383 pages. Available in PDF, EPUB and Kindle. Book excerpt: In recent years transnational private regulators have emerged and multiplied. In this book, experts from various academic disciplines offer empirically grounded case studies and theoretical insights into the evolution and resilience of these bodies through crises. Transnational private regulators display considerable flexibility if compared to public institutions both in exercising their rule-making functions and adapting and transforming in light of endogenous or exogenous crises events calling for change. The contributors identify such events and reflect on their impact on transnational private rule-makers. This edited volume covers important areas of global production and finance that are associated with private rule-making and delves into procedural, substantive and practical elements of private rule-making processes. At a policy level, the book provides comparisons among practices of private bodies in various areas, allowing for important lessons to be drawn for all public and private stakeholders active in, or affected by, private and public rule-making. This title is Open Access.
