Lenders to peripheral eurozone countries are including euro definitions and tightening up the currency wording in their facility agreements to offset the risks of a redenomination.
But strengthening event of default and prepayment event clauses are too politically sensitive for European banks to consider, IFLR can reveal.
Given the potential – however theoretical – of Greece, Portugal, Spain or Italy leaving the eurozone, lenders are looking for ways to strengthen their position should the unthinkable occur.
According to Oliver Edwards of Linklaters in London, one key measure would be introducing a definition of the euro into loan documents and making other related changes to try to increase the likelihood that the euro will continue as the currency of the loan even if the borrower’s country exits the eurozone.
Up until now this definition had not been included in LMA loan documentation.
However, even if a favourable judgment in the euro can...