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Transition to CACs: The Judge, the vultures and the future of creditor rights Marcus Miller University of Warwick , CSGR Dania Thomas Keele University, CSGR October 2006. Questions. To what extent did the US courts influence recent Argentine debt restructuring?

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  1. Transition to CACs: The Judge, the vultures and the future of creditor rightsMarcus Miller University of Warwick , CSGR Dania Thomas Keele University, CSGR October 2006

  2. Questions • To what extent did the US courts influence recent Argentine debt restructuring? • How will judicial influence impact creditor rights in the future?

  3. Comparison of Recent Sovereign Settlements(Porzecanski, 2005) Adjusted for purchasing power , latest (2003) data for Argentina, otherwise data corresponds to year(s) of debt restructuring as noted Source: IIF,IMF, World Bank, A.C.Porzecanski’s calculations

  4. The Argentine debt resolution: overlapping influences

  5. Argentine litigation • Engages the holdouts long enough to stimulate the settlement • Then reins them in to ensure the settlement

  6. Judicial activism

  7. Judge-mediated debt restructuring

  8. Conclusions It may be that, in theory, bonds with CACs can be restructured to ensure engagement and to secure aggregation: in practice it seems that the courts can do a great deal to help. This is why we look to a future with CACs and courts, aided by creditor committees and codes of conduct. Stiglitz (2006) makes a similar point when he argues: “The fact that every advanced country has found it necessary to have a bankruptcy law reinforces the conclusions of economic theory, that collective action clauses will not suffice; some judicial process is required”

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