Clauses & Controversies

Deborah Zandstra, a key figure in the sovereign debt world, discusses initiatives to improve sovereign lending markets, including Euro Collective Action Clauses reforms. The podcast also explores challenges faced by women in the legal field, the evolution of CACs in Euro area debt, unintended consequences of financial regulations, and complex debt management challenges.

Russia-Ukraine Emergency Podcast 2: Subversive Drafting or Goofs The Russian international sovereign bonds, with their weird clauses, are a gift that keep on giving. The closer we look, the more perplexed we are about what some of these crucial clauses – such as the Alternative Payments provision, the pari passu clause, the (lack of) submission to jurisdiction – mean to say. Are they clever allocations of risk where the Russians put the risk of a sanctions regime on investors, or are they drafting goofs? Which court or tribunal gets to decide? Surely not some local court in Moscow? Beyond these weird contract clauses, the invasion raises a host of questions that don't have clear answers. For instance, what happens to the Ukrainian debt (including debt incurred to resist the invasion) if Russia takes control of a substantial part of the country? Does it become Russian debt? Producer: Leanna Doty

Is Russian Sovereign Debt Now Worthless? Sanctions imposed against the Russian Federation are denying it access to foreign exchange reserves, and Russian bonds, trading around par just a short while ago, are now in distressed territory. Bloomberg (quoting former-Elliott guru Jay Newman) says the bonds are worthless, emphasizing that Russia hasn't waived sovereign immunity. It turns out that there is a lot of weird stuff in the Russian bonds, although they might not be as worthless as one might think. We dive into some of the details. Also: why is Ukraine insisting that it will continue to pay its own sovereign debt? Surely if any country had a good excuse for non-payment, it would be Ukraine. Producer: Leanna Doty

Sri Lanka on the Brink? Trang Nguyen, Executive Direction and Emerging Markets strategist at JP Morgan, joins us to discuss both the current state of the EM world and the precarious debt situation in Sri Lanka in particular. In the days since we recorded this episode, Ukraine was invaded and the prices of a number of commodities may shoot through the roof. It is worth asking, in that context, how much more precarious the Sri Lankan debt situation becomes if fuel costs (among other crucial items) rise by 50% or more? And how many more Sri Lankas are out there, poised to fall into default? Producer: Leanna Doty

Is There a Plan for Dealing with the Sri Lankan Debt? Sri Lanka is fast running out of foreign exchange reserves but maintains that it will pay all its debts. And it has many of those: holders of its international bonds are the largest group, but there is also debt to China, India, and other bilateral creditors. We’re puzzled why the government continues to dither in the face of growing shortages of fuel and other essential imports. Is this another case of politicians refusing to recognize the reality of a debt crisis? If not, why doesn’t the government seem to be taking any meaningful steps towards resolution (like involving the IMF). Benjamin Parkin of the Financial Times has been closely following the crisis and joins us to talk about the economic and political situation in Sri Lanka. Producer: Leanna Doty

Should we worry about increasing global (and US) debt? We confess that we do worry. But we also have heard others say this worry is misplaced. Our guest is John Cochrane of the Hoover Institution, a leading expert in financial economics and macroeconomics, who also happened to be Mitu's favorite professor at the University of Chicago. Maybe that experience (teaching Mitu) helped him develop the patience to field our questions about how to think about the current state of gargantuan sovereign debt stocks. We also talk about the merits of a shift to long-term debt financing. Producer: Leanna Doty

What's going on with Venezuela? And can we use it to talk about Blue Bonds? Venezuela has been in and out of the news. A potential forced sale of CITGO. Random creditor attempts to attach Florida assets. And a recent piece in the Financial Times about widespread environmental destruction, which requires capital (ideally in connection with a debt restructuring) to reverse. Sounds like time for another Venezuela episode. But this time, maybe with some Belize mixed in, since Belize's recent restructuring made funds available for the environment and might (to optimists, anyway) be a template for other countries. We talk with Steven Bodzin, deputy editor and Andean region reporter, and Carla Dager, ESG global lead, for REDD Intelligence, a news and information firm focusing on distressed debt and restructuring. Steven and Carla share their deep knowledge of the two countries and help us figure out what to make of recent developments. Producer: Leanna Doty

The Environmental Benefits of the Belize Restructuring There has been a lot of hype about the Belize restructuring, especially the issuance of a so-called Blue Bond and the decision to devote some of the debt savings to marine conservation. Jill Dauchy is founder and CEO of the Potomac Group, which advised The Nature Conservancy on the deal. We ask Jill about the transaction and its key players--for instance, about the importance of political risk insurance by the Development Finance Corporation. Producer: Leanna Doty

The History Behind Lawsuits Over Old Chinese and Russian Sovereign Debt Lawsuits to enforce long-defaulted Chinese bonds (by an engineer in Alabama) and Russian bonds (by the wonderfully-named Carl Marks & Co.) have a storied place in sovereign debt lore. They sit at the intersection of history, politics, and economics, mixed with a bit of law a whole lot of international intrigue. We talk with historian/geographer Elya Zhang of the University of Rochester about the back story behind these courtroom dramas and the broader history of modern Chinese sovereign debt. Producer: Leanna Doty

From Russia With ... Well, Frankly, A Bit of Concern Getting paid on an expropriation claim is difficult in the best of circumstances, even when the sovereign wants to appear hospitable to foreign investors. Russia under Vladimir Putin is not so interested in seeming hospitable. This week, we discuss the famous Yukos litigation with Paul Stephan (Virginia), whose expertise spans international law, international finance, international tax, contracts, and other fields. We also talk about Paul’s forthcoming book on what the future holds for the international legal system. Producer: Leanna Doty