IMF to make life harder for bond default holdouts

Tim Wallace
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HOLDOUT investors should not be able to hold back governments’ defaults and debt restructurings without much wider support, the International Monetary Fund (IMF) said yesterday.

Its proposals come as the Argentinian government remains embroiled in a bitter legal battle with hedge funds over the country’s 2002 default.

Currently some bonds include collective action clauses (CACs) which mean restructurings can take place without challenge, if a super-majority of investors agrees.

And the IMF wants to extend these powers, so 75 per cent of bondholders across all bonds affected approve the restructuring, not just in any one bond. IMF bosses hope this will “limit the ability of holdouts to undermine the restructuring process.”