Clauses & Controversies

Sri Lanka’s Litigation Risk: Yet Another Problem With the Slow Pace of Restructurings A while back, Sri Lanka was sued by an investor, Hamilton Bank. Early on, the lawsuit just seemed strange. Hamilton Bank’s initial claim for violation of the pari passu clause was a clear loser. Sri Lanka then raised a bizarre defense—that only the bond’s registered holder could sue. The lawsuit now involves an ordinary claim for unpaid principal. What’s going on? It seems the fight is about whether Hamilton Bank gets to escape a debt restructuring. A bond contract’s restructuring mechanism can’t affect a creditor who holds a claim based on a court judgment. So if Hamilton Bank gets its judgment first, it can demand payment in full. The broader lesson for the official sector should be clear. All these delays in getting official sector participation sorted out give private creditors time to opt out of a debt restructuring. If the goal is equal treatment across creditor types, maybe hurry it up a bit? Producer: Leanna Doty

Pakistan's Debt Distress Pakistan's debt distress has focused scrutiny on its debt structure, which includes lots of bilateral and official borrowing, much of it from China. The question of how to restructure Chinese lending, in relation to loan by other creditors, will be at the top of the restructuring agenda. Our guest, Reza Baqir, has both been on both sides of the table in debt workouts. He was head of the IMF’s Debt Policy division for a number of years, helping design key sovereign debt policies. He became governor of the State Bank of Pakistan in 2019 as the country faced a balance of payments crisis. He joins us to discuss lessons drawn from these experiences, how the IMF can improve, the role of China in modern debt markets, and how to improve the international debt architecture. Producer: Leanna Doty

Do Native American Tribes Pay Too Much to Borrow? Recent research suggests that Native American tribes pay significantly more to borrow than their municipal counterparts. We try to unpack some of the structural reasons why this might be so with the leading legal expert on the topic, Townsend Hyatt. Townsend, a partner at Orrick, indulges our very basic questions about the pricing penalty that the tribes seem to suffer - and what sorts of reforms might improve this situation. Producer: Leanna Doty

Why is the Zambian Restructuring Dragging on So? There are finally signs of progress in Sri Lanka’s restructuring, with the various bilaterals providing “financing assurances” (whatever they are). But Zambia’s restructuring has been mired in quicksand for far longer. Sovereign debt guru Melissa Butler, of White & Case, who is an expert in Sub-Saharan Africa, joins us to talk about the situation in Zambia and the broader state of sovereign debt restructuring dysfunction. We also ask Melissa about climate resilience clauses and get to talk about her career path as a US-trained lawyer working in London. Producer: Leanna Doty

Professor David Gill discusses the UK's default on US debts post-World War I, its impact on financial markets and diplomatic relations, and how it influences national debt policies today. The podcast explores the complexities of sovereign debt defaults, the Johnson Act's influence on debt repayments, ethical dilemmas in debt repayment, and lending in political contexts.

ESG investing What combines existential dread (climate change) with bewildering What counts as ESG investing? At times, it seems like almost anything could fall under that label. And does ESG investing really have the potential to drive the transition to carbon-neutrality? As sovereign debt specialists, we know only a little bit about the ESG world, and much of what we know comes from reading the work of Natasha White of Bloomberg. Natasha joins us to talk about ESG investing, debt-for-nature swaps like that conducted by Belize, and the overall direction of these markets. Producer: Leanna Doty

Debt Ceiling Drama The drama around the U.S. debt ceiling should be low hanging fruit for a podcast about sovereign debt. But we have been unsure of the legal and economic implications. Do markets care about the debt ceiling? Is there any real risk of non-payment? Aren’t there are dozen obvious ways to borrow despite the ceiling? We ask these and other questions to expert business and economics reporter Wailin Wong, of NPR’s The Indicator from Planet Money, who is (thankfully) much less confused than we are. Producer: Leanna Doty

Domestic Debt, Financing Assurances, and other Fault Lines in Sovereign Debt Restructuring Ghana’s attempts to restructure its domestic debt have been a bit of a mess, repeatedly failing to win enough creditor support before (as of this recording) finally appearing to have succeeded. But some holders of domestic bonds appear to be getting better treatment. Reuters reporters Karin Strohecker and Jorgelina do Rosario have somehow kept up with fast-developing events in Ghana, Sri Lanka, Argentina and other sovereign debt hotspots. They join us to talk about the implications of the Ghanaian domestic debt restructuring for other sovereign borrowers (e.g., Sri Lanka), the slow pace of debt restructurings under the G-20’s Common Framework (and otherwise), and the very strange debt buyback plan announced by Argentina. Producer: Leanna Doty

Ghana's Restructuring: Why the Mess? Sovereign debt restructurings seem to be stuck in quicksand. The various players (IMF, China, commercial creditors, Paris Club, arbitration award holders, etc) each point to the others as the reason for the lack of progress. And the much ballyhooed Common Framework seems to have made little impact. Chelsey Dulaney of the Wall Street Journal joins us to talk about the state of things globally and to help dispel our confusion about what is going on in Ghana. Producer: Leanna Doty

Do Bondholders Care About Bankruptcy Access? Theory tells us that bondholders care whether sovereign debtors have access to a bankruptcy process. Fear that bondholders would react to such access negatively is what tanked the IMF’s Sovereign Debt Restructuring Mechanism proposal a decade ago. But do bondholders really care about bankruptcy access, or do other things matter more? Our guest, Rich Schragger, is the author of City Power: Urban Governance in a Global Age, and an expert in local government law, urban policy, constitutional law and other matters. He also (along with Mitu) recently attempted to examine this question in the context of US municipal debt by looking at the disclosures made by borrowers about whether they do or do not have bankruptcy access. In this podcast, we ask Rich about his work on local governments, fiscal constitutionalism, city power and, of course, whether access to bankruptcy is as important as theory would suggest. Producer: Leanna Doty