An exit exchange in the shadow of a collective action clause
(CAC) may be the best way of engineering an orderly Greek debt
restructuring and avoiding triggering credit default swap (CDS)
new paper by respected Duke University sovereign debt
restructuring expert Mitu Gulati and Jeromin Zettelmeyer of the
European Bank of Reconstruction and Development examined using
just CACs and using a CAC plus an exit exchange.
They concluded that the best option for restructuring
Greeces domestic law-governed bonds was to combine a CAC
and an exchange offer that wouldnt actually invoke the
CAC and trigger the CDS contracts, as opposed to the other two
In other words, a CAC would be retrofitted and the use
of the CAC would be explicitly or implicitly threatened but
would not be...