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Wreck of Medusa

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Wreck of Medusa

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  1. SeminarSOVEREIGN STATE INSOLVENCYNovember 2008by Philip R WoodSpecial Global Counsel, Allen & Overy LLPVisiting Professor in International Financial Law, University of OxfordYorke Distinguished Visiting Fellow, University of CambridgeVisiting Professor, Queen Mary College, University of LondonVisiting Professor, London School of Economics & Political Science

  2. Wreck of Medusa

  3. What is state insolvency? Historical background • Early history: wars, kings and more wars • The 19th century serial disasters • The 20th century: three disasters • The 21st century - the big one • Who's next?

  4. 53. Map: State insolvency 1980-2005

  5. 56. Map: Bank insolvencies 1980-2002

  6. Comparison with corporate bankruptcies (1) • Realisation • Management • Freeze on creditor actions • Dissenting creditors • Disclosure

  7. Comparison with corporate bankruptcies (2) • Preferences • Security • Priorities • Discharge

  8. Comparison with corporate bankruptcies (3) • Delinquencies • Currency • Interest • Set-off • Debt/equity conversions

  9. Protections to insolvent states • Local assets inviolable • Monetary sovereignty • Legislative sovereignty • IMF Agreement art VIII, s 2(b) • Sovereign immunity • Insulation of state entities

  10. Rescheduling ladder of priorities • Supra-national creditors/trade debt/interbank debt./ small creditors • Government debt/public bond issues/commercial banks • Non-accepting creditors

  11. Architecture • IMF • Paris Club • London Club • Bondholder committees

  12. Rescheduling practice: key points • Banks (reschedule or exchange) • Bonds (exchange) • Central bank • Rescheduled debt: short-leash • Debt reconciliation • Most favoured debt clause • Collective action clauses • Exit consents (Ecuador 1999)

  13. Finally IMF sovereign debt restructuring mechanism Conclusions

  14. Venus in shell

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