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How CACs Became Boilerplate, or, The Politics of Contract Change

Gelpern, Anna; Gulati, Mitu

In 1997, a developing country defied convention. It issued New York law bonds that let 75% of the bondholders change key financial terms. Until then, standard form New York law contracts required unanimous consent. But no one seemed to notice the innovation, and just about no one followed suit. In 2003, another developing country issued New York law bonds with a 75% amendment threshold. The world of international finance erupted in applause and criticism. Major press outlets, finance ministers and senior executives publicly pondered the shift. Other countries adopted similar provisions under the rubric of "collective action clauses" or "CACs". Academic study of sovereign debt contracts took on new importance. This chapter reports on an effort to understand what happened and what it means.

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More About This Work

Academic Units
Initiative for Policy Dialogue
Publisher
Initiative for Policy Dialogue
Series
Initiative for Policy Dialogue Working Paper Series
Published Here
February 2, 2010

Notes

The opinions expressed in these papers represent those of the author(s) and not The Initiative for Policy Dialogue. These papers are unpublished and have not been peer reviewed. Please do not cite without explicit permission from the author(s).

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