Sonia Chaliha, Regional Head of Latin America and Canada Corporate Trust businesses, was recently asked to participate in a United Nations Committee looking at best practices for Sovereign Debt workouts.
Sonia is a prime example of BNY Mellon’s leadership, providing business insights on a global scale. Read Sonia Chaliha's executive profile.
In this Q&A, we learn more about Sonia’s work with the United Nations Sovereign Debt Restructuring committee and the complex debt restructuring deals that led her there.
How did the opportunity arise to work with the UN Sovereign Debt Restructuring Committee?
I was invited by the head of the committee on the recommendation of a partner at a law firm which is well known for its work in this space. Over time, BNY Mellon has built up a profile as a subject matter expert, when acting as trustee or agent, for both complex and sovereign workouts. Rather than deal with a structure after the fact, we are known for engaging from the outset with our clients and their advisors to look at the most expeditious routes to facilitate the optimal outcome.
Can you tell us about some of the most notable sovereign debt restructuring deals and what’s next for the team?
We are widely recognized for our work with the Republic of Argentina on its high profile debt restructuring in 2016. We have since gone on to support Argentina as it has successfully re-entered the international capital markets on a number of occasions including, its landmark $16.5 billion issuance as well as a 100-year bond. Most recently, we also worked with the government of Belize.
We were also involved with all previous exchanges by the Republic of Argentina, as well as restructurings by Brazil, Uruguay, Ecuador and the Ukraine. Our pedigree also includes working on U.S. government stabilization initiatives, such as The Troubled Asset Relief Program, Term Asset-Backed Securities Loan Facility, Maiden Lane I & II (the AIG bailout) and Public-Private Investment Partnership following the financial crisis, as well as bailout of several German landesbanks.
We are keeping a close eye on Brazil, as the political and economic landscape stabilizes. We expect this to yield a number of opportunities for us to provide support for restructuring, refinancing and M&A activities.
Can you tell us more about the purpose and composition of the UN Sovereign Debt Restructuring Committee, and your interaction with the committee?
In addition to the UN representatives, the committee is composed of members from IMF, central banks, development banks, trade and industry associations and academia, as well as governments and their advisors.
This particular UN committee was set up to look at improvements in the market, based on approaches used by sovereigns in the event of a restructuring and provide best practice recommendations. Much of the impetus for focusing on this topic arose as a result of the holdout creditor success in Argentina and Greece.
The committee held a series of meetings with the aim of producing a whitepaper that covered recommended improvements to contractual provisions, structural arrangements and creditor engagement processes, among other topics. The initial meetings had not included any discussion or representation by trustees or fiscal agents and it soon became apparent that this was an oversight given the way in which sovereigns traditionally raise financing internationally. As one of the subject matter experts on the committee, I provided guidance on the roles applied by trustees, agents, structural mechanics and enhancements that have potential for adoption or that were already adopted.
Can you share details about the committee’s whitepaper titled “Sovereign Debt Restructuring: Further Improvements in the Market Based Approach”?
All participants, including me, were invited to comment on the various proposals included in the whitepaper ahead of and during the June meeting held at the Commonwealth Secretariat in London. Since Chatham House Rules were invoked, our comments were not directly attributed to any individual or organization.
I am pleased to say, as of August 30, 2017, the whitepaper entitled “Sovereign Debt Restructuring: Further Improvements in the Market Based Approach” is now in the public domain! It was published as a Technical Study Group Report by the Financing for Development Office, Department of Economic and Social Affairs, United Nations, New York.
What do you think makes BNY Mellon’s insight invaluable in this type of situation?
As a global institution, we have extensive experience in serving sovereigns and sub-sovereigns internationally and throughout a variety of political and credit cycles. As such, we have the unparalleled advantage of seeing what works and what doesn’t over time. This benefit, combined with a broad, lateral view of enhancements and preemptive measures, allow us to provide measured support and expertise, effectively across multiple markets and sectors.
If you want to learn more about BNY Mellon’s restructuring experience, as well as its Latin America and Canada Corporate Trust businesses, we encourage you to contact us.
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