Clauses & Controversies

Hamilton Bank Redux We have talked before about the lawsuit by Hamilton Bank against Sri Lanka, noting that Hamilton Bank is trying to avoid the effect of a restructuring. Once it gets a judgment, it will have a claim to be paid in full despite any subsequent modification of the bond. Sri Lanka seems to know this and has been raising plausible but weak legal arguments in an apparent attempt to delay the case. Now the government has outright asked the court to stay the lawsuit (though without explicitly saying what it is concerned about). We are skeptical the judge will grant an outright stay, but perhaps there is room for a little foot dragging...? Producer: Leanna Doty

The New Not Normal Felix Salmon, the OG of sovereign debt journalism joins us for our final episode of the season. We talk to Felix about his forthcoming book, The Phoenix Economy: Work, Life, and Money in the New Not Normal. The past three years of pandemic life have changed things around the world. Felix asks what this new “not normal” is and how it might impact what is coming next. Our particular focus, of course, is on what Felix thinks is in store for us on the sovereign debt front. And there is a lot to talk about: inflation fears, rising interest rates and China, China, China. Producer: Leanna Doty

In a Bad State The world of sovereign debt research has long given short shrift to insights that might be gained from the study of sub sovereign debt. In this episode, we talk to David Schleicher of Yale Law about his new book "In a Bad State" about the federal government's responses to various local debt crises over the past two centuries. Turns out that there are lots of lessons to be learned from the fascinating world of US state and muni debt. Producer: Leanna Doty

Ukraine's Victory in the UK Supreme Court More than three years after hearing argument, the U.K. Supreme Court finally handed down a decision in Russia's $3 billion bond dispute with Ukraine. The dispute probably shouldn't be in a domestic court at all (functionally, it is a dispute over a bilateral loan between sovereign states). But that's where it is, and the U.K. Supreme Court ruled in favor of Ukraine's duress defense, which now can go to trial. Our guest, Nate Oman (William and Mary) is a guru of contract law (and many other things). Nate helps us think through Ukraine's duress argument, the U.K. Supreme Court's rulings about the borrowing capacity and authority of states and their officials, and how the law of restitution fits into all of this. Producer: Leanna Doty

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