Second Progress Report On Inclusion of Enhanced Contractual Provisions in International Sovereign Bond Contracts
December 27, 2016
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<p>The IMF Executive Board endorsed in October 2014 the inclusion of key
features of enhanced pari passu provisions and collective action clauses
(CACs) in new international sovereign bonds. Specifically, the Executive
Board endorsed the use of (i) a modified pari passu provision that
explicitly excludes the obligation to effect ratable payments, and (ii) an
enhanced CAC with a menu of voting procedures, including a “single-limb”
aggregated voting procedure that enables bonds to be restructured on the
basis of a single vote across all affected instruments, a two-limb
aggregated voting procedure, and a series-by-series voting procedure.
Directors supported an active role for the IMF in promoting the inclusion
of these clauses in international sovereign bonds. The IMFC and the G20
further called on the IMF to promote the use of such clauses and report on
their inclusion.
</p>
<p>
In September 2015, the IMF published a progress report on the inclusion of
the enhanced clauses in international sovereign bonds as of end-July 2015.
The report found that since the Executive Board’s endorsement, substantial
progress had been made in incorporating the enhanced clauses: 41 issuances,
representing 60 percent of the nominal principal amount of total issuances,
had included the enhanced clauses as of July 31, 2015. The 2015 paper also
provided initial observations on the patterns of incorporation, the market
impact of inclusion of the enhanced clauses, and an update on the
outstanding stock of international sovereign bonds.
</p>
<p>
This paper provides a further update on the inclusion of the enhanced
clauses and on the outstanding stock of international sovereign bonds as of
October 31, 2016. Section II reports on the inclusion of these enhanced
provisions, finding that uptake of the clauses has continued, with only a
small minority of new issuances not including them. Section III provides an
update on the outstanding stock, which reveals that while an increasing
percentage of the outstanding stock includes enhanced clauses, a
significant percentage of the stock still does not. Section IV reports on
the use of different bond structures, and Section V describes the staff’s
ongoing outreach efforts. Section VI briefly reports on other recent
developments relevant to the contractual approach to sovereign debt
restructuring and Section VII concludes with next steps.
</p>
<p>The IMF Executive Board endorsed in October 2014 the inclusion of key
features of enhanced pari passu provisions and collective action clauses
(CACs) in new international sovereign bonds. Specifically, the Executive
Board endorsed the use of (i) a modified pari passu provision that
explicitly excludes the obligation to effect ratable payments, and (ii) an
enhanced CAC with a menu of voting procedures, including a “single-limb”
aggregated voting procedure that enables bonds to be restructured on the
basis of a single vote across all affected instruments, a two-limb
aggregated voting procedure, and a series-by-series voting procedure.
Directors supported an active role for the IMF in promoting the inclusion
of these clauses in international sovereign bonds. The IMFC and the G20
further called on the IMF to promote the use of such clauses and report on
their inclusion.
</p>
<p>
In September 2015, the IMF published a progress report on the inclusion of
the enhanced clauses in international sovereign bonds as of end-July 2015.
The report found that since the Executive Board’s endorsement, substantial
progress had been made in incorporating the enhanced clauses: 41 issuances,
representing 60 percent of the nominal principal amount of total issuances,
had included the enhanced clauses as of July 31, 2015. The 2015 paper also
provided initial observations on the patterns of incorporation, the market
impact of inclusion of the enhanced clauses, and an update on the
outstanding stock of international sovereign bonds.
</p>
<p>
This paper provides a further update on the inclusion of the enhanced
clauses and on the outstanding stock of international sovereign bonds as of
October 31, 2016. Section II reports on the inclusion of these enhanced
provisions, finding that uptake of the clauses has continued, with only a
small minority of new issuances not including them. Section III provides an
update on the outstanding stock, which reveals that while an increasing
percentage of the outstanding stock includes enhanced clauses, a
significant percentage of the stock still does not. Section IV reports on
the use of different bond structures, and Section V describes the staff’s
ongoing outreach efforts. Section VI briefly reports on other recent
developments relevant to the contractual approach to sovereign debt
restructuring and Section VII concludes with next steps.
</p>
Subject: Bond issues, Bonds, Collective action clauses, Debt restructuring, Sovereign debt
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