By Colleen Goko<\/p>\n
JOHANNESBURG, April 20 (Reuters) – Major bond investors including Amundi and T. Rowe Price have proposed adding clauses to sovereign bonds that would allow emerging countries to pause \u200cdebt payments for up to a year without defaulting in the event of a \u200ccrisis.<\/p>\n
The plan from the Bondholder Working Group, a subgroup of commercial creditors of the British-backed London Coalition on Sustainable Sovereign Debt, \u200baims to help countries grappling with short-term cash crunches, while maintaining market access.<\/p>\n
The proposal comes amid frustration among developing nations that have faced repeated external shocks, from war\u2011driven energy spikes to climate disasters, which have hit their economies.<\/p>\n
“This is a bondholder\u2011led initiative, developed through a consultative process with issuers and other stakeholders, which \u200cis precisely why it is commercially \u2060viable and more likely to work for both investors and developing countries,” said Samy Muaddi, head of Emerging Markets Fixed Income at T. Rowe Price.<\/p>\n
“Some critics \u2060think the proposal does too little… Other critics argue it goes too far,” Muaddi added.<\/p>\n
Under the proposal, which excludes nations already in default or facing unsustainable debt levels, countries could suspend payments either by declaring a \u200bnational emergency \u200bor seeking emergency International Monetary Fund financing.<\/p>\n
This would also \u200brequire 30 days’ notice to bondholders and \u200cparticipation from at least 60% of other external creditors in similar relief measures.<\/p>\n
A second, expedited option activates if a disaster causes damage exceeding 15% of GDP, as certified by the World Bank.<\/p>\n
“Implementing these features could establish more coherent and predictable crisis response… and ultimately support more stable and efficient markets that benefit both issuers and investors,” the Bondholder Working Group said.<\/p>\n
The proposal foresees the clauses to be embedded \u200cin contracts of future bonds and includes safeguards for \u200binvestors, allowing bondholders with at least 50% of eligible holdings \u200bto block a pause if conditions, such \u200bas transparency or equitable creditor participation, are not met.<\/p>\n
Abebe Selassie, director of the \u200cIMF’s African Department, highlighted the potential for such \u200bmeasures to complement existing \u200bcrisis response mechanisms.<\/p>\n
“We’d be very happy to … try and provide our thoughts, (on) the individual country cases where when shocks are hit, where particular payments could be onerous,” he told Reuters.<\/p>\n
Previous efforts \u200bto embed crisis-responsive clauses into sovereign \u200cdebt have met resistance from private creditors over enforceability and moral hazard concerns.<\/p>\n","protected":false},"excerpt":{"rendered":"By Colleen Goko JOHANNESBURG, April 20 (Reuters) – Major bond investors including Amundi and T. Rowe Price have…\n","protected":false},"author":2,"featured_media":595873,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[27],"tags":[69623,259794,259796,28,259797,62164,130359,166882,259795,259798,246123,104034,49032],"class_list":["post-595872","post","type-post","status-publish","format-standard","has-post-thumbnail","category-business","tag-bond-investors","tag-bondholder-working-group","tag-british-backed-london-coalition-on-sustainable-sovereign-debt","tag-business","tag-clauses","tag-crisis-response","tag-debt-payments","tag-developing-nations","tag-emerging-countries","tag-predictable-crisis","tag-sovereign-bonds","tag-sovereign-debt","tag-t-rowe-price"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts\/595872","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/comments?post=595872"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts\/595872\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/media\/595873"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/media?parent=595872"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/categories?post=595872"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/tags?post=595872"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}