Paris Club considers action against “vultures”

Official creditors' group seeks to stop sale of HIPC obligations to litigating funds

  • By Philip Alexander
  • 22 Oct 2007
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The Paris Club of official creditors is considering “concrete measures” to prevent private litigation undermining efforts at debt relief for heavily indebted poor countries (HIPC). Concern is growing among Club members at the trend for private funds to buy the sovereign obligations of countries eligible for official debt forgiveness, and then sue for full value recovery through the courts, its president Xavier Musca has told Emerging Markets.

Musca said litigating creditors have already been awarded around $1 billion by the courts. “Compare this amount with the $1.5 billion in debt relief expected so far from private creditors in the framework of the HIPC initiative.”

When the Paris Club writes off HIPC debts, it usually asks private creditors to accord comparable treatment to the government concerned. But in a crucial judgement in February 2007, a UK court upheld a demand from so-called “vulture fund” Donegal International for Zambia to repay debts worth more than $55 million, originally owed to the Romanian government. Donegal had purchased the obligations in 1999.

In May this year, the Paris Club publicly expressed alarm over the phenomenon, and Musca said they have since discussed methods to curb the practice. “The common aim of these different measures is to facilitate negotiations between HIPC countries and their non-Paris Club creditors, thus avoiding the selling of claims to litigating creditors,” he explained.

These measures include better information for HIPC countries on the precise financial requirements of comparability of treatment, and “technical assistance from the Paris Club Secretariat to analyze debt treatment offers from other creditors.”

Musca added that the Paris Club wanted to strengthen its communication policy on the issue, “both towards the general public and to non-Paris Club creditors that would be willing to provide HIPC debt relief.”

The major non-Paris Club official creditor in Africa is China, and Musca said that Beijing’s reaction towards any debtor that encountered difficulties repaying debts is not known.

“However, we know that China has provided debt relief to several low-income countries, most of them eligible to the HIPC initiative.” He added that the Paris Club “would welcome a dialogue” with China on debt-related issues concerning HIPC, to enhance “a better mutual understanding.”

“We feel that it would make sense for the Paris Club and China to have some exchange of information regarding the debt treatments that would need to be provided to low-income countries in debt-distress.”

  • By Philip Alexander
  • 22 Oct 2007

All International Bonds

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • 12 Sep 2016
1 JPMorgan 268,483.43 1096 8.71%
2 Citi 246,887.13 889 8.01%
3 Barclays 232,454.96 721 7.54%
4 Bank of America Merrill Lynch 219,007.69 764 7.10%
5 HSBC 187,245.69 759 6.07%

Bookrunners of All Syndicated Loans EMEA

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • 20 Sep 2016
1 BNP Paribas 25,880.49 114 6.73%
2 UniCredit 25,281.81 120 6.58%
3 JPMorgan 24,287.96 45 6.32%
4 HSBC 20,765.28 102 5.40%
5 ING 17,698.87 110 4.60%

Bookrunners of all EMEA ECM Issuance

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • 20 Sep 2016
1 JPMorgan 12,228.29 67 10.51%
2 Goldman Sachs 10,054.63 54 8.64%
3 Morgan Stanley 7,741.62 42 6.65%
4 Bank of America Merrill Lynch 7,346.61 35 6.31%
5 Citi 7,299.47 39 6.27%