Thursday, November 27, 2014

Mexico’s Bold Move on Debt Restructuring Contracts

Looks like Mexico learned from the debt restructuring experience of Argentina...


Thu., November 13, 2014
No one expects Mexico to restructure its debt anytime soon. But if it ever does, so-called vulture investors like Mr. Singer’s Elliott Management will find it much harder to crash the debt restructuring party – as they have done so successfully in Argentina – thanks to tough new provisions written into the contracts of new bond issues for the country, the International New York Times DealBook blog reported. This week, the Mexican government made a United States securities filing for an issue of bonds that would include new, improved collective action clauses specifically written to keep holdout investors like Mr. Singer at bay. Vulture investors will be required to accumulate a much larger position in order to block a debt restructuring agreement by the majority, and the dreaded pari passu clause – which holds that all investors be treated equally – has been stripped of much of its power. Debt restructuring gurus are jumping for joy, with Anna Gelpern at Georgetown calling the foray by Mexico “the iPhone 6″ of debt restructuring contracts. Mr. Singer and other vulture investors were able to buy enough Argentine bonds over the years to make the case – in New York courts – that Argentina must make interest payments to them even though they did not participate in any of the debt restructuring agreements struck by the majority of investors.

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