Fourth Progress Report on Inclusion of Enhanced Contractual Provisions in International Sovereign Bond Contract
Policy Papers, March 21, 2019
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- Fourth Progress Report on Inclusion of Enhanced Contractual Provisions in International Sovereign Bond Contract
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Bibliographic details
- Published: March 21, 2019
- Series: Policy Papers
- DOI: https://doi.org/10.5089/9781498302968.007
Scope and timing
- Reports progress in inclusion of enhanced collective action clauses (enhanced CACs) and modified pari passu clauses as of end-October 2018.
- Publication date: March 21, 2019.
- Pages: 12.
- Series: Policy Paper No. 2019/008.
- DOI: https://doi.org/10.5089/9781498302968.007
Key findings
- Enhanced CACs have now become the market standard, with only a few issuers standing out from the market trend.
- Around 88 percent of international sovereign bonds (in aggregate principal amount) issued since October 2014 in the main jurisdictions of New York and England include enhanced CACs.
- The modified pari passu clause continues to be incorporated as a package with the enhanced CACs, with few exceptions.
- In line with findings in previous reports, the inclusion of enhanced CACs does not seem to have an observable pricing effect, according to either primary or secondary market data.
- The outstanding stock of international sovereign bonds without enhanced CACs remains high, with about 39 percent of the outstanding stock including enhanced CACs.
Implications
- Market adoption: The near-universal uptake for new issues in main jurisdictions since October 2014 indicates broad market acceptance of enhanced CACs.
- Legacy stock: A substantial portion of the outstanding stock lacks enhanced CACs (implied by the finding that about 39 percent of the outstanding stock includes enhanced CACs), suggesting continued legal and restructuring considerations for existing bonds.
- Contractual package: The persistent pairing of modified pari passu clauses with enhanced CACs suggests standardization of contractual suites rather than isolated clause changes.
- Pricing: Absence of an observable pricing effect in both primary and secondary markets suggests that investors do not demand a measurable premium or discount for enhanced CACs in the sample and period analyzed.
International Monetary Fund. Fourth Progress Report on Inclusion of Enhanced Contractual Provisions in International Sovereign Bond Contract, Policy Papers 2019, 008 (2019).
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- Policy Paper