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1 Transition to CACs: The Judge, the vultures and the future of creditor rights Marcus Miller University of Warwick, CSGR Dania Thomas Keele University,

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Presentation on theme: "1 Transition to CACs: The Judge, the vultures and the future of creditor rights Marcus Miller University of Warwick, CSGR Dania Thomas Keele University,"— Presentation transcript:

1 1 Transition to CACs: The Judge, the vultures and the future of creditor rights Marcus Miller University of Warwick, CSGR Dania Thomas Keele University, CSGR October 2006

2 2 Questions To what extent did the US courts influence recent Argentine debt restructuring? How will judicial influence impact creditor rights in the future?

3 3 Comparison of Recent Sovereign Settlements  (Porzecanski, 2005)  Argentina 2005 Ecuador 2000 Pakistan 1999 Russia Ukraine Uruguay 2003 Per Capita Income ($)* 11,5863,3631,8266,5923,8418,280 Scope ($ Billions) Number of Bond Series Jurisdictions Months in Default Principal Forgiveness Yes NoYesNo ‘Haircut’ in Discount Bond (%) Participation Rate (% of Eligible)  Adjusted for purchasing power, latest (2003) data for Argentina, otherwise data corresponds to year(s) of debt restructuring as noted Source: IIF,IMF, World Bank, A.C.Porzecanski’s calculations

4 4 The Argentine debt resolution: overlapping influences

5 5 Argentine litigation Engages the holdouts long enough to stimulate the settlement Then reins them in to ensure the settlement

6 6 Judicial activism

7 7 Judge-mediated debt restructuring

8 8 Conclusions Stiglitz (2006) makes a similar point when he argues: “The fact that every advanced country has found it necessary to have a bankruptcy law reinforces the conclusions of economic theory, that collective action clauses will not suffice; some judicial process is required” It may be that, in theory, bonds with CACs can be restructured to ensure engagement and to secure aggregation: in practice it seems that the courts can do a great deal to help. This is why we look to a future with CACs and courts, aided by creditor committees and codes of conduct.


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