Enhanced CACs are the market standard and are working well

from Sovereign Debt Restructurings – Key IMF Policies and Challenges

The Key IMF Policies in Sovereign Debt Restructuring

▪ Endorsed by the IMF in 2014

► “Single-limb” feature allows a qualified majority of creditors across all series to bind all bonds.

► Only “double-limb” feature has been used in recent debt restructurings (e.g., rgentina, cuador, Ukraine (2022)). Has generally worked well.

▪ Inclusion has become the market standard:

► As of end-December 2022, there have been around 1,000 issuances of international sovereign bonds for a total of approximately USD 1.3 trillion since IMF endorsement in 2014.

► 92 percent (nominal principal amount) of issuances since end-June 2020 have included enhanced CACs.

► Revised pari passu clauses are generally included as a package with the enhanced CACs.

▪ Over 70 percent of outstanding stock now includes enhanced CACs (with the redemption profile heavily tilted towards bonds with the old style “series-by-series” CACs)

Enhanced CACs are the market standard and are working well

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The Key IMF Policies in Sovereign Debt Restructuring

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The Key IMF Policies in Sovereign Debt Restructuring

The Key IMF Policies in Sovereign Debt Restructuring

The Fund’s Framework for Sovereign Debt Restructuring

Statutory solutions have been adopted or proposed in a few countries

Work to improve debt transparency is ongoing, with more work to come later this year

Other contractual features could also support timely and efficient restructurings

Model

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Sovereign Debt Restructurings – Key IMF Policies and Challenges