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Abstract

Over the last ten years, organisations such as the IMF have launched several initiatives to change market practice with respect to sovereign bond contract drafting to ease restructuring after defaults. The first ofthese, the universal adoption of collective action clauses, was embraced by the market after some hesitation. Another proposal - the more widespread appointment of trustees to represent bondholders intimes of crisis, to centralise enforcement action against the debtor and thus to facilitate debt relief - has so far failed to have the desired impact. Amongst other potential reasons for this failure, the argument hasbeen made that to vest enforcement rights in the trustee, as opposed to individual bondholder rights, would be to reduce the deterrence against opportunistic defaults and thus to exacerbate moral hazard.Using a sample of secondary market bond spreads and information on default status, this paper assesses empirically whether sovereign bonds issued under a trust structure indeed carry a higher default risk. Itfinds no systematic evidence of either a spread premium or higher actual default rates for bonds with collective enforcement rights.



Item Type: MPRA Paper -

Original Title: Trustees versus fiscal agents and default risk in international sovereign bonds-

Language: English-

Keywords: trustee; fiscal agent; sovereign bonds; default; moral hazard; collective action clauses-

Subjects: K - Law and Economics > K3 - Other Substantive Areas of Law > K33 - International LawF - International Economics > F3 - International Finance > F34 - International Lending and Debt ProblemsK - Law and Economics > K1 - Basic Areas of Law > K12 - Contract Law-





Autor: Häseler, Sönke

Fuente: https://mpra.ub.uni-muenchen.de/35332/







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