Clauses & Controversies

Delve into Argentina's FRANs, with a drafting glitch leading lucky investors to 100% annual interest. Ben Heller discusses dodgy exit amendments and sovereign states raising defenses. Explore bond structures, market dynamics, and complex financial instruments. Uncover ethical dilemmas in financial agreements and regulations for abuse prevention in financial restructuring.

What to Make of the Stay Order in Hamilton Reserve Bank v. Sri Lanka? Strange things have been going on in the Hamilton Reserve Bank v. Sri Lanka case in New York federal court. Recently, in response to requests from the US and other governments, the judge agreed to stay the lawsuit for 6 months before giving HRB a judgment. We have long been confused about why HRB wants a judgment so quickly, and we're no less confused now. Does HRB have a stake big enough to block a vote to modify payment terms? We have assumed it does but are now less sure. Even if HRB can block a vote on payment terms, we're wondering if Sri Lanka can use exit consents (which HRB's position is clearly too small to veto) to twist its arm into going along with a restructuring. Otherwise, why all the fuss? Clearly the judge thinks HRB creates risks to the restructuring, and the U.S. and other governments seem to agree. We try to figure out what is going on. Producer: Leanna Doty *The episode was updated to acknowledge an error made by Mitu & Mark during the recording of the podcast. Mitu & Mark reference Judge Preska instead of Judge Cote, who issued the stay.

China’s Defaulted War Debts We’ve long viewed China’s defaulted debt from the first half of the twentieth century through the lens of the communist government refusing to pay back the defaulted debts of Imperial China. But historian Elya Zhang’s wonderful work on China’s debts documents how the story is much more complex and, in particular, how the Imperial debt is but a sliver of the Chinese sovereign borrowing that was subsequently defaulted on. Much of it, it turns out, was war related borrowing of various types done during the 1938-49 period. And the stories underlying what happened are, as Elya tells us, are fascinating. Producer: Leanna Doty

Political scientists Alexandra Zeitz and Lauren Ferry discuss how China's emergence as a major lender has impacted debt restructuring processes. They delve into topics such as Chinese lending in Africa, government relationships with private creditors, confusion surrounding debt contracts, negotiating IMF programs with borrowing countries, limitations and changes in sovereign debt architecture, unanswered questions on local currency debt, and coordination challenges in recent restructuring episodes.

Priscila Azevedo Rocha and Todd Gillespie discuss the investigation of sustainability-linked bonds, their effectiveness in combating climate change, risk allocation, alternative models, data adequacy, and the role of labels in investment decisions. They also explore retail markets, global youth activism, financial engineering, and the slow progress of the market.

Kenza Bryan, sustainability-linked bonds expert, discusses the unambitious nature of sustainability-linked bonds, GOP backlash against ESG lending, fake carbon credits, and lack of global consensus on debt relief for environmental objectives. She emphasizes the need to engage with new ideas and reform existing systems for climate improvement.

Exploring sustainability linked bonds and their potential to drive climate change action. Discussion on the purpose and perception of SLBs, the intricacies of bond issuance, and legal loopholes in bond documents. Delving into the rarity of bond call options and make-hole provisions. Exploring the challenges of proving beneficial ownership in legal cases.

Venezuelan Debt: The CITGO Auction, Statute of Limitations, and Other Enforcement Matters It’s a busy time for Venezuela’s creditors. The auction process is starting for the sale of Venezuela’s ownership interest in US-based refiner CITGO. The six year statute of limitations on bond claims is coming up, and both the Maduro government and the National Assembly are trying to head off a new wave of lawsuits by giving assurances that, if bondholders hold fire, the country won’t later raise the statute of limitations as a defense. Meanwhile, although a comprehensive debt restructuring would seem to be in everyone’s best interests, the ongoing US sanctions regime continues to make that impossible. Steven Bodzin of REDD Intelligence is one of the most incisive and knowledgeable observers of what’s going on in Venezuela. He joins us to help figure out the current state of play. Producer: Leanna Doty

Chasing Payment on Old Cuban Debt We have a great fondness on this podcast for unpaid historical debts and the attempts to litigate these. One such story is that of Cuban debts. Our guest is Rebecca Burton of Linklaters (London), who joins us to talk about the saga of CRF v. Banco Nacional de Cuba and the 2023 ruling out of the High Court in London. Among the key questions here was whether in fact CRF, a hedge fund that had consolidated a bunch of old Cuban debts, had in fact validly received authorization to be able to litigate against the Cuban state. Producer: Leanna Doty

Unpacking the Argentine GDP Warrants Case In 2005 and 2010, Argentina issued GDP-linked warrants as a sweetener to investors participating in its debt restructurings. At the time, the warrants didn’t seem so sweet. Holders assigned them little value, and most got rid of the warrants for pennies on the dollar. But in April, in a lawsuit brought by hedge funds that had bought the warrants on the cheap, an English judge ruled that Argentina had dramatically underpaid on the warrants, adding nearly 1.5 billion to the amount the country owes to foreign creditors. Our guests this episode are Tim Dodsworth, Maggie Hemsworth, and Severine Saintier, hosts of the fabulous Unpacking Contract Law podcast, who help us understand the intricacies of the case. Producer: Leanna Doty