es hat sich schon immer ausgezahlt die Papiere von Buchheit möglichst früh zu lesen.....

Download This Paper| Share

Based on your IP address, your paper is being delivered by:    New York, USA If you have any problems downloading this paper, please click on another Download Location above, or view our FAQ File name: SSRN-id2292669. ;   Size: 797K

The Gathering Storm

Lee C. Buchheit 

Cleary Gottlieb Steen & Hamilton LLP - New York Office

G. Mitu Gulati 

Duke University - School of Law
July 11, 2013

Abstract:     
The contingent liabilities of a sovereign, such as guarantees of the debts of third parties, can normally be kept off the balance sheet of the sovereign guarantor. That is their charm. As the debt to GDP ratios of many developed countries approach red-zone levels, contingent liabilities are increasingly being favored over direct, on-the-balance-sheet, borrowings.

But what happens if a country carrying large contingent liabilities needs to restructure its debt? The borrower dare not leave its contingent claims out of the restructuring. To do so would risk undermining the financial predicates of the sovereign’s economic recovery program should the beneficiaries of the guarantees demand payment in full after the restructuring closes.

Attempting to shoehorn sovereign contingent liabilities into a debt restructuring, however, is a particularly challenging task. There are few precedents for how to do so, and no good precedents. The explosion in the size of contingent sovereign obligations since the financial crisis began in 2008 inevitably means that these issues will need to be confronted sooner or later, probably sooner.
Number of Pages in PDF File: 19
working papers series 

Download This Paper

Date posted:  

Suggested Citation

Buchheit, Lee C. and Gulati, G. Mitu, The Gathering Storm (July 11, 2013). Available at SSRN: http://ssrn.com/abstract=2292669

Contact Information

Lee C. Buchheit (Contact Author) Cleary Gottlieb Steen & Hamilton LLP - New York Office ( email ) One Liberty Plaza New York, NY 10006-1470 United States
Gaurang Mitu Gulati Duke University - School of Law ( email ) Box 90360 Duke School of Law Durham, NC 27708 United States