Clauses & Controversies Ep 161 - Argentina Again
Sep 29, 2025
The hosts dive into the Trump administration's possible rescue of Argentina's economy, raising questions about political motivations. They explore the baffling nature of Argentina's negative pledge clauses in sovereign bonds, highlighting their lack of protection for bondholders. The discussion contrasts how these clauses differ from typical structures, pondering whether they represent drafting mistakes or clever legal design. Join the conversation as they unravel complex financial terms and speculate on the implications for market stability!
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Why Negative Pledges Matter
- Negative pledge clauses exist to limit a sovereign's ability to grant secured debt without protecting existing bondholders.
- These clauses matter most when a country seeks bilateral secured loans from states like China or the US.
Mexico Bailouts As Precedent
- Mark recalls U.S. interventions in Mexico in 1982 and 1995 as precedents for demanding collateral.
- He expects Treasury will again request collateral if it provides major assistance to Argentina.
Big Hole In Argentina's Clause
- Argentina's negative pledge appears to cover only tradable, marketable instruments rather than all forms of external borrowing.
- That creates a large gap allowing bilateral or non-marketable secured lending without triggering bond protections.