Would Collective Action Clauses Raise Borrowing Costs
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Would Collective Action Clauses Raise Borrowing Costs
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Author : Barry Eichengreen
language : en
Publisher: World Bank Publications
Release Date : 2000
Would Collective Action Clauses Raise Borrowing Costs written by Barry Eichengreen and has been published by World Bank Publications this book supported file pdf, txt, epub, kindle and other format this book has been release on 2000 with Bonds categories.
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.
Would Collective Action Clauses Raise Borrowing Costs An Update And Additional Results
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Author : Ashoka Mody
language : en
Publisher:
Release Date : 2016
Would Collective Action Clauses Raise Borrowing Costs An Update And Additional Results written by Ashoka Mody and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2016 with categories.
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].
Bond Restructuring And Moral Hazard
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Author : Torbjörn Becker
language : en
Publisher: International Monetary Fund
Release Date : 2001-08
Bond Restructuring And Moral Hazard written by Torbjörn Becker and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2001-08 with Business & Economics categories.
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.
Do Enhanced Collective Action Clauses Affect Sovereign Borrowing Costs
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Author : Kay Chung
language : en
Publisher:
Release Date : 2020-08-07
Do Enhanced Collective Action Clauses Affect Sovereign Borrowing Costs written by Kay Chung and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2020-08-07 with categories.
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.
Bond Restructuring And Moral Hazard
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Author : Torbjorn Becker
language : en
Publisher:
Release Date : 2005
Bond Restructuring And Moral Hazard written by Torbjorn Becker and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2005 with categories.
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.
Collective Action Clauses In Sovereign Bond Contracts Encouraging Greater Use
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Author : International Monetary Fund. Policy Development and Review Dept.
language : en
Publisher: International Monetary Fund
Release Date : 2002-06-06
Collective Action Clauses In Sovereign Bond Contracts Encouraging Greater Use written by International Monetary Fund. Policy Development and Review Dept. and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2002-06-06 with Business & Economics categories.
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Collective Action Clauses Recent Developments And Issues
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Author : International Monetary Fund. Monetary and Capital Markets Department
language : en
Publisher: International Monetary Fund
Release Date : 2003-03-25
Collective Action Clauses Recent Developments And Issues written by International Monetary Fund. Monetary and Capital Markets Department and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2003-03-25 with Business & Economics categories.
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Collective Action Clauses And The Restructuring Of Sovereign Debt
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Author : Patrick S. Kenadjian
language : en
Publisher: Walter de Gruyter
Release Date : 2013-08-01
Collective Action Clauses And The Restructuring Of Sovereign Debt written by Patrick S. Kenadjian and has been published by Walter de Gruyter this book supported file pdf, txt, epub, kindle and other format this book has been release on 2013-08-01 with Law categories.
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.
A Debt Restructuring Mechanism For Sovereigns
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Author : Christoph G Paulus
language : en
Publisher: Bloomsbury Publishing
Release Date : 2014-12-01
A Debt Restructuring Mechanism For Sovereigns written by Christoph G Paulus and has been published by Bloomsbury Publishing this book supported file pdf, txt, epub, kindle and other format this book has been release on 2014-12-01 with Law categories.
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.
Can The Moral Hazard Caused By Imf Bailouts Be Reduced
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Author : Barry J. Eichengreen
language : en
Publisher: Centre for Economic Policy Research
Release Date : 2000
Can The Moral Hazard Caused By Imf Bailouts Be Reduced written by Barry J. Eichengreen and has been published by Centre for Economic Policy Research this book supported file pdf, txt, epub, kindle and other format this book has been release on 2000 with Business & Economics categories.
Economics literature emphasizes the need to limit IMF financial rescues, but inaction is too painful. This first "Special Report" argues that institutional reforms are needed if the international policy community is to succeed in containing the moral hazard caused by IMF financial rescues.