A note on collective action clauses in sovereign bonds

Dr Rodrigo Olivares-Caminal, assistant professor at the University of Warwick, UK. Email: R.Olivares-Caminal@warwick.ac.uk

Collective action clauses, or CACs, are clauses that if they are included in the prospectuses of the bonds, the interaction of the bondholders is required. There are four different types of CACs. These are[1]: (1) collective representation clauses[2]; (2) majority action clauses; (3) sharing clauses[3]; and (4) acceleration clauses[4]. Within majority action clauses is the type of clauses that have been strongly pursued by the official sector and many academics and they were effectively incorporated in sovereign bond issuances. Due to the scope of this article special focus will be provided to these clauses.