Newsletter January 2014: New proposals for sovereign restructuring

LONDON – The Bank of England and the International Capital Market Association (ICMA) have both entered the growing debate about the need for a more formal debt restructuring mechanism for sovereigns. There is no legal insolvency procedure for governments, and the International Monetary Fund (IMF) proposed in April 2013 the introduction of an automatic maturity extension or bail-in of sovereign debt ahead of any IMF assistance programme (see last edition of GRR). The multilateral also suggested a single, aggregated collective action clause (CAC) that would allow a sovereign to impose restructuring on the holders of all its bond maturities if an overall majority of holders across all maturities agreed.