Debt rescheduling clauses (collective action clauses, CACs)

Issuers of bonds – in practice: in economically unstable countries – build in provisions at the time of issuance that allow private security creditors to act collectively in the event of default. This is primarily a matter of enabling majority decisions by the creditors on any changes to the contractual payment terms. This is intended to keep any debt rescheduling proceedings that may become necessary at a later date on an orderly track from the outset. – At the end of 2011, the members of the EMU decided to provide all new bonds with uniform, identical provisions in the future (collective action clauses), which regulate the participation of private creditors in the event of sovereign default. – See Brady bonds, European stabilization mechanism, London procedure, Prague proclamation, debt restructuring, asset levy, mandatory convertible bond…. – See Deutsche Bundesbank Annual Report 2003, p. 109; ECB Monthly Report July 2011, p. 87 f. (debt rescheduling clauses for euro area government bonds); Deutsche Bundesbank Monthly Report February 2013, p. 44 f. (introduction of CACs mandatory for euro area government bonds since the beginning of the year).

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University Professor Dr. Gerhard Merk, Dipl.rer.pol., Dipl.rer.oec.
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