The sovereign view

Author: | Published: 1 Apr 2007

The legal innovations in sovereign debt documentation over the last few years reveal a common theme – the desire for supermajority creditor control of the sovereign debt workout process. After decades of believing that their best protection against sovereign misbehaviour lay in the threat of a creditor class individually entitled to punish transgressions by litigation, why should sovereign debt holders have now shifted their bias toward majority control? Perhaps the well-publicized attempts by holdout creditors to seize payments destined for fellow lenders that had given the sovereign debt relief in the past brought home the first rule of Sherwood Forest: when he takes from someone else, he is Robin Hood; when he takes from you, he is a brigand.

Or the fresh memory of a major sovereign debt restructuring dragging on year after exasperating year may have convinced some holders that speed in the workout process – even at the cost...