Hybrid journal (It can contain Open Access articles) ISSN (Print) 1750-7219 - ISSN (Online) 1750-7227 Published by Oxford University Press[396 journals]
Authors:Gulati M. Pages: 129 - 130 Abstract: At the time of writing this (March 2018), one of the most significant matters facing the international capital markets is the debt crisis in Venezuela. For that reason, our headline article in this issue is a piece laying out the contours of a likely future restructuring of Venezuelan debt by the economist and sovereign debt restructuring expert, Adam Lerrick. Alongside Adam’s economics-oriented piece, we also have pieces by some of the most eminent legal scholars who study bond contracts and debt restructurings. These experts include Marcel Kahan (New York University), Lee Buchheit (Cleary Gottlieb) and John Coyle (University of North Carolina at Chapel Hill). In different ways, and some more directly than the others, all three of their pieces are relevant to how a debt restructuring in Venezuela is likely to proceed. Marcel Kahan’s piece on the implications of the Second Circuit’s Marblegate case, for example, is directly on point for Venezuela because almost all of Venezuela’s external debt is governed by New York law and a significant portion of it will likely have to use the Exit Consent technique for a restructuring (that Marblegate is, in a way, all about). PubDate: Fri, 06 Apr 2018 00:00:00 GMT DOI: 10.1093/cmlj/kmy011 Issue No:Vol. 13, No. 2 (2018)
Authors:Lerrick A. Pages: 131 - 135 Abstract: Key pointsTransferring the Venezuelan assets of the national oil company Petroleos de Venezuela, SA (PDVSA), including its oil concessions, to the Venezuelan government by act of the National Assembly, will enable an exchange of PDVSA bonds dollar for dollar for identical government bonds. This will create a uniform pool of sovereign bonds that can be restructured in a classic sovereign debt exchange.There will be few holdout PDVSA bondholders, because there are no significant PDVSA assets outside Venezuela that can be seized by creditors and creditors have little ability to seize Venezuelan government assets in Venezuela.The ability of creditors to seize oil-related assets and disrupt the flow of oil revenue will be greatly reduced by the PDVSA exchange and by an adjustment to the oil sale settlement mechanism that provides payment in Venezuela.The official sector and the courts will view the government’s offer to exchange PDVSA bonds dollar for dollar for identical government bonds as a sincere good faith effort to resolve a difficult situation in a fair and equitable manner. PubDate: Tue, 06 Mar 2018 00:00:00 GMT DOI: 10.1093/cmlj/kmy003 Issue No:Vol. 13, No. 2 (2018)
Authors:Kahan M. Pages: 136 - 147 Abstract: Key pointsSection 316(b) of the Trust Indenture Act provides that a bondholder’s right to receive payment of principal and interest may not be impaired without unanimous bondholder consent. In Marblegate, the Court of Appeals for the Second Circuit correctly confined the scope of section 316(b) to formal amendments to core payment terms.An issue left open by Marblegate is whether formal amendments that release a guarantor from its obligations or that expand the conditions in which a guarantor is automatically released require unanimous consent. The literal wording of section 316(b) would support the interpretation that they do.From a functional economic perspective, it is important to distinguish between parent guarantees and subsidiary guarantees. Functionally, there is no reason to distinguish the right to payment from a parent guarantor from the right to payment from the principal obligor. Requiring unanimous consent to release a parent guarantor is thus justified. By contrast, requiring unanimous consent to release a subsidiary guarantor does neither much harm nor much good since indentures leave companies with significant scope to eviscerate the economic benefit of subsidiary guarantees even if such a requirement is imposed.The different degree of protection afforded to minority bondholders with respect to changes in core payment terms under US (stronger) and English (weaker) law and drafting conventions relate to the different degrees of protection afforded under US (weaker) and English (stronger) law and drafting conventions against coercive exit consents. These types of protections are substitutes. PubDate: Mon, 19 Mar 2018 00:00:00 GMT DOI: 10.1093/cmlj/kmy001 Issue No:Vol. 13, No. 2 (2018)
Authors:Buchheit L; Gulati M. Pages: 148 - 151 Abstract: Key pointsThe prospect of the potential mischief that may be caused by holdout creditors in a Venezuelan sovereign debt restructuring is probably the main reason why the Maduro administration has not attempted such an exercise. The next administration in Venezuela—whenever, and however, it may arrive—will not want for suggestions about how to minimize or neutralize this holdout creditor threat. This short article is another contribution to that growing literature. Were the Republic of Venezuela to acknowledge that there really is only one public sector credit risk in the country, and that the distinction between Republic bonds and Petróleos de Venezuela SA (PDVSA) bonds is an artificial construct, the Republic could offer to exchange PDVSA bonds for new Republic bonds at par. This would be the preliminary to a generalized debt restructuring of some kind affecting all outstanding bonds. The question will be, as it always is, how to discourage PDVSA creditors from declining to participate in such an exchange offer.One method might be for PDVSA to pledge all of its assets to the Republic in consideration for the Republic’s assumption of PDVSA’s indebtedness under its outstanding bonds and promissory notes. This is a step expressly permitted by PDVSA’s bonds and promissory notes. Existing PDVSA creditors would be perfectly free to decline to exchange their exposure for new Republic bonds, but they would face the prospect that a senior lien holder (the Republic) would have a first priority claim over any PDVSA assets that the holdout may attempt to attach to satisfy a judgment against PDVSA. That realization should make them think twice about the wisdom of holding out. PubDate: Mon, 12 Mar 2018 00:00:00 GMT DOI: 10.1093/cmlj/kmy007 Issue No:Vol. 13, No. 2 (2018)
Authors:Coyle J. Pages: 152 - 167 Abstract: Key pointsWhen the US lawyers draft bond indentures, they typically pay little attention to the choice-of-law clause. They select New York law and move on.Over the past few decades, the state and federal courts in New York have adopted a number of interpretive rules that they use exclusively to construe choice-of-law clauses. Several of these rules produce outcomes that are arguably inconsistent with the expectations of most contracting parties. Drawing upon a hand-collected data set of 351 bond indenture forms filed with the SEC, this article seeks to determine whether the choice-of-law clauses in these agreements have been updated to account for these adverse interpretive decisions. In a surprising number of instances, it finds that these clauses have not been updated.This inattention likely stems from the fact that neither the issuers nor the underwriters nor the trustees nor the lawyers who advise them view the ancillary language in the choice-of-law clause—everything except the words ‘New York’—as particularly important. Since most new indentures are based on past templates, choice-of-law clauses in old agreements routinely slip into new agreements without discussion or alteration.The effect of this inattention is to expose the issuer to unnecessary legal risk. To address this risk, the article proposes ‘model’ clause language for drafters to incorporate into future bond indentures. The use of this language will, in the author’s view, substantially reduce the risk that claims relating to an indenture will be governed by the law of a state other than New York. PubDate: Tue, 13 Mar 2018 00:00:00 GMT DOI: 10.1093/cmlj/kmy006 Issue No:Vol. 13, No. 2 (2018)
Authors:Pickel R. Pages: 168 - 184 Abstract: Key pointsPost-crisis regulatory reforms, which have transformed OTC derivatives from a relationship-focused business to a regulation-focused business, have created challenges for institutions that have traditionally focused on the relationship business.ISDA, a linchpin of the relationship-focused derivatives business, has adjusted its focus to adapt to a world where regulation is a primary focus.P.R.I.M.E. Finance, which did not exist before the crisis, can explore ways to expand its focus in the new world of regulation even as it continues to develop its offerings of dispute resolution, education and information resources for the relationship world. PubDate: Thu, 15 Mar 2018 00:00:00 GMT DOI: 10.1093/cmlj/kmy005 Issue No:Vol. 13, No. 2 (2018)
Authors:Wood P. Pages: 185 - 193 Abstract: Key pointsWe need moral rules with sanctions in order to survive. The laws of the countries of the world are together the largest and most comprehensive set of moral rules which we have.Capital markets are governed by a set of laws which are fundamentally based on moral standards and are, therefore, together a moral philosophy governing this class of activity. PubDate: Wed, 07 Mar 2018 00:00:00 GMT DOI: 10.1093/cmlj/kmy008 Issue No:Vol. 13, No. 2 (2018)
Authors:Klimos P. Pages: 194 - 222 Abstract: Key pointsThis article provides an overview of the key technical components of the distributed ledger technology (DLT) and evaluates its prospective application to financial markets. It also highlights the foreseeable risks and challenges the DLT might face throughout its development and implementation, as well as the potential legal, regulatory and governance frameworks for such an evolving technology.The DLT is at an early stage of development and is currently facing different types of challenges. Some are generic, and others are particularly related to its application to financial markets.The more the DLT develops and expands, the more experts would be able to evaluate its intrinsic as well as practical risks and rewards. However, one of the challenges facing regulators and policy-makers today is how to avoid the twin risks of over- and under-regulation through a balanced regulatory approach in which the interests and concerns of all stakeholders are taken into consideration.Financial market infrastructures, participants and regulators are expected to gradually assimilate the DLT with incremental adoptions of its components as an enhancement to exiting platforms and processes. The progressive availability and maturity of this technology would help determine the extent to which comprehensive arrangements could eventually replace the so-called legacy system. PubDate: Wed, 28 Mar 2018 00:00:00 GMT DOI: 10.1093/cmlj/kmy002 Issue No:Vol. 13, No. 2 (2018)
Authors:Ewing R. Pages: 223 - 225 Abstract: Key pointsPRIIPs and MiFID II product governance seem to have originated from the retail structured product environment and have been particularly challenging to apply when exported to commoditized flow environments.Various industry efforts in the flow space have focused on developing practical approaches compatible with its specific dynamics.There has been an initial focus on professional investors only, followed by a general retail approach for simple low-denomination listed bonds. PubDate: Tue, 13 Mar 2018 00:00:00 GMT DOI: 10.1093/cmlj/kmy009 Issue No:Vol. 13, No. 2 (2018)
Authors:Mitchell J. Pages: 226 - 274 Abstract: Key pointsUnder the Australian Stock Exchange Listing Rules, formal disclosure is only effectively required when the event is material to the firm, which introduces firm discretion and judgement into the disclosure process.This article investigates if formal disclosure of buyback information results in immediate market reactions and whether there are various incentives for firms to provide formal disclosure for both initial and final formal buyback releases.For initial buyback announcements, formal (Form 3C) disclosure is less likely to be provided where the buyback is (a) conducted on a non-domestic (overseas) exchange, (b) combined with higher analysts’ coverage, and (c) with a higher stated buyback percentage.For the final buyback notification, incentives encouraging formal (Form 3F) disclosure are where there is (a) an overseas buyback, (b) a higher percentage of shares actually repurchased, (c) higher analyst following, as well as other economic incentives such as: (d) greater firm size as well as higher prior-period (e) abnormal returns and (f) volatility.Providing formal 3C disclosure results in no incremental positive price-reaction, although a marginal reduction in relative volatility occurs, which is beneficial.Providing formal 3F disclosure for the final release has (a) significant positive price-reaction benefits for ‘bad news’ environments and (b) overall, there is a marginal reduction in relative trading volume due to reduced disagreement.Using the formal buyback 3C and 3F disclosure has both a different and distinct immediate information impact and relevance. Combined with the incentives for disclosure, this illustrates the value relevance of as well as the inherent discretion in providing formal disclosure, especially for the final buyback notice. PubDate: Thu, 12 Apr 2018 00:00:00 GMT DOI: 10.1093/cmlj/kmy004 Issue No:Vol. 13, No. 2 (2018)
Authors:Lejot P. Pages: 275 - 292 Abstract: Key pointsAttempts to influence Libor and other interest rate benchmarks by procuring or providing false submissions to data collators are examples of misconduct or criminal behaviour that may have taken place for some years before becoming widely known early in the 2007–2009 financial crisis.Subsequent enquiries, litigation, trials and regulatory settlements described conduct that disturbed not only popular opinion but senior financiers and regulators who might have been expected to require ethical behaviour of those concerned. Misconduct and its apparent toleration accordingly contributed to a general loss of trust in the financial sector.This article considers the neglect of interest benchmark misconduct; why distinct forms of misconduct have been wrongly conflated in popular and official narratives and in judicial proceedings; and whether a pervasive loss of trust caused by a perception of widespread misconduct has had lasting commercial or location-specific effects.It also asks whether reforms intended to restore external confidence by substituting recorded transaction data for subjective estimates may revive functional concerns that interest benchmarks were created to remove. PubDate: Wed, 04 Apr 2018 00:00:00 GMT DOI: 10.1093/cmlj/kmy010 Issue No:Vol. 13, No. 2 (2018)
Hybrid journal (It can contain Open Access articles)
[396 journals]
