by finance.yahoo.com — Marton Eder and Dana Khraiche —Sovereign bond restructurings are rarely smooth. Lebanon’s looks like it will be particularly rocky. The rules underpinning the nation’s looming debt overhaul may complicate efforts to gather enough support to change the terms of its bonds. At the same time, they could protect the country from some of the issues that left Argentina with lengthy court battles. So say Mark Weidemaier and Mitu Gulati, law professors at the University of North Carolina and Duke University, who published online reports about the nation’s $30 billion of international bonds after reviewing the detailed terms laid out in the Fiscal Agency Agreement. That document has only been available to bondholders at the office of Lebanon’s fiscal agent in Luxembourg. “Lebanon’s FAA explicitly allows it to do what got Argentina into trouble,” they said in a post on the Creditslips academic blog. The terms make it “more difficult for holdouts to complain when the government pays restructuring participants (and everyone else) while leaving holdouts with nothing,” they said.
Pari Passu: The so-called pari-passu clauses, used to guarantee equal treatment of creditors, may be a rare positive element for Lebanon in a revamp fraught with difficulties. More stringent terms in Argentina’s case left it battling holdouts in court for more than a decade. Markets have already priced in the difficulties. Most dollar bonds are trading below 25 cents on the dollar, indicating losses of more than 75% on the face value of notes. Lebanon’s foreign-currency credit rating was cut to restricted default by Fitch Ratings on Wednesday.