The Penalty Doctrine in Contract LawWe've never been fans of the contract law rule against penalties. Why can't parties (sophisticated ones at least) agree to suffer a penalty in the event of breach? We’d ordinarily avoid this topic, because the doctrine makes little sense and the issue doesn’t come up much in the sovereign debt world. But recently…

A New Competition For Law (and Jurisdiction)?Jurisdictions famously compete for businesses to use their corporate law. Less discussed is the competition for having one’s law chosen to govern contracts. But it happens. Sovereign debt lawyers in England and New York can, if they have a few drinks in them, can be quite entertaining in their sniping at…

An Execution Sale is Not a Receivership. (Right?)Creditors of Venezuela and PDVSA, its state oil company, have forced an execution sale of PDVSA's only US asset – which happens to be the ultimate parent company of CITGO. The federal judge overseeing the process has tried to keep things orderly, but the inter-creditor fighting is getting juicy. Some…

Hamilton Bank v. Sri Lanka: What the $@#$ ?Accusations that Hamilton Bank is a giant fraudster stealing depositor funds, bizarro requests from Hamilton to the court that other creditors be constrained in using their contract rights against it, an amicus intervention in the case to say nothing at all . . . and on and on. This case gets more and more…

Zambia’s Restructuring: A Post-MortemZambia’s recently concluded restructuring seemed to drag on forever, debilitated by conflicts among the various creditor groups. Why did these different groups think the others were being unreasonable in their demands? And what can we learn from what happened? Our guest is one of the keenest observers in the sov…

The Champerty ShowAh, Champerty. Perpetual runner-up, to the doctrine of consideration, in the Stupidest Legal Rule pageant. Why do directly (e.g., via the abuse of process claim) what you can do clumsily and indirectly (by limiting an injured party’s access to finance)? But what do we know? Actually, not much. We do know that Venezuela/PDVSA won a…

IMF Rescues Pakistan From the Brink of Default (Again)Pakistan looks to be in the process of finalizing yet another IMF program. Yet again, it has been rescued from the brink of default with a bailout justified by some heroic assumptions about how a state of sustainability will magically materialize. Why? Our guest, Zohra Ahmed, of Boston Universit…

A Better Way to Freeze (and Seize?) Russian Assets? Ever since Russia invaded Ukraine in 2022, there has been talk of what international law doctrines might be utilized to induce Russia to back off. One of those doctrines that has been whispered about is now, thanks to a wonderful new article by our guest, international law guru and Yale Law profes…

Cambodia’s Debts to the US: How “Dirty” Are They?Roughly a half century ago, in the 1970s, the US infamously bombed Cambodia. Less known is that the US, through a “Food for Peace” program, made a series of loans to the somewhat dodgy government of General Lon Nol. The loans were made, at least in part, to assist Cambodians displaced by the bombings…

Ukraine's Preliminary Debt Restructuring DealUkraine reportedly has reached terms with a subset of its bondholders, agreeing to restructure the country's roughly $24 billion in bond debt. What to make of the deal? It seems (to our view) to be premised on the IMF's entirely unrealistic assumptions about Ukraine's future debt repayment capacity. The …

Tortious Interference and Inter-Creditor DutiesCreditors in sovereign debt restructurings often complain about other creditors. And creditors often try to limit what other creditors get (at least indirectly, via most favored nations clauses, comparability of treatment, etc.). Can these efforts sometimes create a risk of liability? Does that risk ev…

El Salvador’s Warrants: Bukele’s Folly?El Salvador has issued a new bond, using part of the proceeds to buy back some bonds that mature in the relatively near term. The issuance includes a detachable warrant that pays up to an additional 4% if El Salvador does not get an IMF program in place soon (or achieve a higher credit rating). The issuance ha…

The Latest in the Argentine GDP Warrant Saga: Drafting Goof or Sneaky Drafting?There are so many intriguing aspects of the latest installment of the Argentine GDP Warrant Saga. This time, from Judge Preska in the SDNY, Argentina scores a big, and for us, totally unexpected victory. Argentina’s lawyers, at a very late stage, discovered a magic bulle…

Lessons from the 1980s Debt CrisisThe 1980s debt crisis began in Mexico and engulfed countries around the world, leading, via the Brady Plan, to the revival of the bond markets. Beyond that, we confess to relatively little knowledge about this fundamental episode in sovereign debt history. For so many of the leading lights of the contemporary sover…

A Way to Use Frozen Russian Assets to Help Ukraine?There has been much chatter lately about a proposal from Lee Buchheit, Daleep Singh and Hugo Dixon to address concerns in Western nations about using frozen Russian assets to get Ukraine much needed war financing. One might ask why these nations are so concerned about confiscating Russian assets wh…

Ukrenergo ConfusionRumor has it that holders of bonds issued by Ukrenergo, the state-owned corporation that runs Ukraine's electricity distribution system, expect to get better treatment in a debt restructuring, even though their bonds are guaranteed by the state and at least arguably can be forced to vote alongside holders of Ukrainian sovereign b…

Who Benefits from Lifting Sanctions on Buying Venezuelan Bonds?Banning U.S. parties from buying Venezuelan bonds was probably a bad idea. But was it a good idea to lift the ban last fall? Investors apparently sold the Biden administration on the idea that lifting the ban would yield big benefits: bonds had migrated into the hands of parties acting …

The Last Sovereign Bond in New YorkDue to litigation over the PDVSA 2020 bond, all future issues of sovereign bonds in New York have been canceled, effective immediately. (PDVSA is quasi-sovereign, but whatever...) You may have heard that New York’s highest court has ruled that investors cannot enforce sovereign bonds, period. Well, maybe that's no…

Something Black in the Lentils at UkrenegroA few weeks ago, there was an announcement that some of the creditors of the Ukrainian electric company, Ukrenegro, wanted their debt restructuring talks to be separate from any broader Ukrainian debt restructuring. And the prices of the Ukrenegro bonds (backed by a sovereign guarantee) shot up. This intri…

Back to the Future (Again) -- Russian Frozen Assets EpisodeIn recent months, there has been much talk about what to do with frozen Russian assets and, in particular, whether they can be repurposed to aid Ukraine in its fight against the Russian invasion. This is not the first time that large amounts of Russian assets have been frozen though, with h…

Tierra del Fuego and Tinfoil HatsThe financial press has mostly overlooked the recent debt restructuring by Argentine province Tierra del Fuego. (To be fair, Mark has overlooked it too.) But there were aspects of the deal that might strike some as a bit coercive – like an initial proposal to pay investors who consented early more than investors who…

Can Someone Explain What is Happening to SLBs?A year and a half or so ago, we were working on a paper with UVA’s Quinn Curtis on how the promises being made in the typical “use of proceeds” Green Bonds were empty. In the course of that project, we had loads of conversations with industry insiders, who largely agreed, but said that we were studying …

Equity Receiverships and Sovereign DebtObservers of sovereign debt markets have long lamented the inability to impose restructuring terms on dissenting creditors. Indeed, there are currently several bills pending – some of which are utterly bonkers, in our view – in New York to change the law in ways that will limit holdout activity in sovereign de…

How Much of the YPF Judgement Will Burford, Realistically, Recover?Burford Capital, a highly sophisticated litigation finance operation, has won an enormous judgment ($16 billion, where its share is upwards of $6 billion) against the Republic of Argentina. The question is how much of this judgment Burford is realistically likely to be able to colle…

Argentina's 2001 Debt Saga RevisitedArgentina's 2001 default spawned nearly 15 years of litigation, culminating in the (in)famous pari passu injunction. Many episodes of the saga have been told in isolation, but it is complicated—FRANs, pari passu, Lock Law, RUFO, etc.—and, until recently, we didn't know of anything that captured it in full. Our gu…

What the FRAN?This episode is on Argentina's famous FRANs (floating rate accrual notes). The notes were intended to protect holders against the risk that the country's credit would deteriorate... and boy did they ever. Due to a drafting glitch, or a simple failure of imagination, the FRANs wound up earning a few lucky (well, smart) investors somewh…

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 confus…

China’s Defaulted War DebtsWe’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 …

China’s Impact on Sovereign Debt RestructuringsThere has been much chatter (a lot of it out of Washington) about how China is mucking up the financial architecture for sovereign debt restructurings. Given the political and strategic biases of much of the chatter, it is often hard to separate out real claims from bullshit. Political scientists, Laur…

Dodgy SLBsWe’ve been intrigued by the potential of sustainability-linked bonds. In theory, they should improve on green, “use of proceeds” bonds by providing incentives for issuers to invest in emissions reductions and other climate-related objectives. That’s why many in the green finance world were excited about them. But how are they working out …

Are sustainability-linked bonds here to stay?Sustainability-linked bonds (SLBs) tie the issuer’s payment obligations to the satisfaction of some environmental benchmark. In principle, this could be good and provide an incentive for bond issuers to set ambitious climate-related goals. In reality, SLBs have proven a bit of a bummer. They set unambiti…

Sovereign Sustainability Linked Bonds: What’s Going On?The newest product on the sovereign scene is the sustainability linked bond. The product is potentially exciting because, on its face, it seems to remedy some of the incentive problems embedded in the more commonly used “use of proceeds” green bonds. Chile and Uruguay have issued slbs with cons…

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 Nation…

Chasing Payment on Old Cuban DebtWe 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.…

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 h…

Is a Diaspora Bond a Loan or a Gift? Contract law distinguishes contracts from promises to make a gift. Contracts are enforceable; gift promises are not. Theories supporting this distinction note that gift promises often are made in relational and non-market settings where reputational and other enforcement mechanisms work well, and where legal enf…

Hamilton Bank ReduxWe 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 w…

The New Not NormalFelix 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 …

In a Bad StateThe 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 ou…

Ukraine's Victory in the UK Supreme CourtMore 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 i…

Sri Lanka’s Litigation Risk: Yet Another Problem With the Slow Pace of RestructuringsA 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 registere…

Pakistan's Debt DistressPakistan'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 …

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 b…

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-Sahara…

The Long Shadow of Default The sovereign debt literature has somehow managed to overlook one of the biggest, most enduring debt defaults on record, involving one of the world’s richest democracies. We’re talking about the United Kingdom’s failure to pay its First World War debts owed to the United States. We talk with David Gill (University of Nott…

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…

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 o…

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 tr…

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 Dulane…

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…