Peru protects itself with new clauses in debt filing

miércoles 15 de julio de 2015 17:40 GYT

By Paul Kilby

NEW YORK, July 15 (IFR) - The Republic of Peru became the latest emerging markets country to include a clause in a debt shelf filing that protects it from any potential legal battles with holdout investors.

Many emerging market sovereigns including Mexico are adding or looking to add such clauses on bond offerings to avoid the legal quagmire currently enveloping Argentina.

Securities issued off the shelf will contain collective action clauses allowing the sovereign to amend terms as long as the vast majority of holders are on board, according to an up to US$3.455bn SEC debt shelf filed by Peru on Wednesday.

The new CAC clauses aim to prevent a minority group of bondholders from holding up payments to others. They typically spell out that any restructuring can go ahead with a 75% approval from investors, binding any dissenting creditors in the process.

This safeguard is mainly a result of Argentina's ongoing battle with holdouts led by Elliott Management's NML Capital, who are demanding payment for bonds the sovereign defaulted on in 2001.

In 2012, those investors won a US court ruling that prevented Argentina from paying holders of restructured bonds unless it also did the same for holdouts.

Peru was last in the international markets in March when it raised some US$1.3bn equivalent in a dual-currency offering as part of liability management operations designed to reduce dollar debt and extend maturities. BBVA, Deutsche Bank and Morgan Stanley acted as leads on that occasion.

Proceeds from any new bond sale off the shelf will be used for general purposes, including debt refinancings, the repurchasing of existing external and domestic debt, or a bond exchange, it said. (Reporting By Paul Kilby; editing by Shankar Ramakrishnan)