IMF Proposes Changes to Government Bond Contracts

The International Monetary Fund Monday backed a gradual exchange of government bonds around the world with new contracts to counter risks that holdout creditors could disrupt potential debt restructurings, The Wall Street Journal reported. The IMF, along with some investors and economists, have warned that U.S. legal rulings that forced Argentina’s hand in a long battle with holdout creditors could imperil other debt operations because they give a small minority outsized power. The IMF said the rulings by a New York court set a precedent for the hundreds of billions of dollars of sovereign bonds written in New York, but the magnitude of the impact is unclear. How the ruling will be affect other cases, including a case covering Grenada’s debt, will be determined by how other courts around the world interpret the same terms imposed on Argentina. Read more. (Subscription required.)