Clauses & Controversies Ep 6 ft. Anna Gelpern
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Sep 1, 2020 
In this episode, Anna Gelpern, a financial expert in sovereign debt and collective action clauses, discusses Argentina's debt restructuring and the controversial use of collective action clauses. They explore the role of emotions and personal relationships in high finance, the development of CACs, and the limitations of public CACs as a regulatory intervention. They also touch on the impact of specific contract wording, interpretation in legal contracts, and the complexities of debt restructuring and countering holdouts.
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Sovereign Debt Restructuring Challenges
- Sovereign countries cannot declare bankruptcy, creating coordination problems among creditors during debt restructuring.
- Self-interested creditors can undermine restructuring that benefits the collective.
The Role of Collective Action Clauses
- Collective action clauses (CACs) in bond contracts replicate bankruptcy features, enabling creditor majority to bind all creditors to restructuring outcomes.
- CACs allow a supermajority of creditors to approve a restructuring, binding all creditors.
Controversial Restructurings
- Argentina and Ecuador's recent debt restructurings sparked controversy due to their methods.
- The controversy stems from how these countries used CACs in their restructuring processes.