Acollective action clause (CAC) allows asupermajority ofbondholders to agree to adebt restructuring that is legally binding on all holders of the bond, including those who vote against the restructuring. Bondholders generally opposed such clauses in the 1980s and 1990s, fearing that it gave debtors too much power. However, followingArgentina's December 2001 default on its debts in which its bonds lost 70% of their value, CACs have become much more common, as they are now seen as potentially warding off more drastic action, but enabling easier coordination of bondholders.
During theGreek government-debt crisis, the Greek government imposed, with the support of theIMF andECB, a retroactive CAC with a threshold of 75%.[1] That impacted 90% of the bonds, which issued under the jurisdiction of Greek courts.[1] On 9 May 2012, the required supermajority was obtained, with 85.8% of domestic-law bonds tendered in favour.[2] An investor namedBill Gross said, "The sanctity of their contracts is certainly lessened. Bondholders have that to look forward to going into the future,"[2] but the French Minister of Finance celebrated the deal.[2] In the exchange, investors will receive new bonds with a face value of 31.5 percent of the old ones, together with notes from theEFSF.[2] The new debt is governed by English law and comes with warrants that may provide extra income in years if Greek economic growth exceeds thresholds.[2][3]
In accordance with the treaty establishing theEuropean Stability Mechanism, all bonds issued byEurozone member states with maturities exceeding one year, issued after January 1, 2013, have a mandatory collective action clause.[4]
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